them tend to build on the gaps and strengths of existing products and services. The dominance of the "BlackBerry" has no
REPORT ON INNOVATION PRACTICES
2018 Authors:
Collaborators: Jean-Louis Moreau, MBA
June 2018
Table of Contents
Pages
3
6
8
13 18
Introduction
Highlights
Definition of Innovation
Understanding Competitive Advantages
Innovation and Success
22 27 36 41 State of Innovation Practices
The Ambition of Innovation
Proposals to Move Forward
Appendices
2
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2
1. Introduction
Introduction
”Nearly 50% of the current S&P 500 (companies) will be replaced over the next ten years.” (1)
Innovation, a fundamental element to organizations’ success In an era of globalization where changes (digital shift, artificial intelligence, democratization of information) are ubiquitous, organizations must adapt quickly and continuously to ensure their survival. According to an analysis published by Innosight in 2018, the service life of companies listed on the S&P 500 index has decreased from an average of 33 years in 1964, to 24 years in 2016. It will be only 12 years long by 2027 (1). Today's managers are under constant pressure to ensure that their organization generates healthy returns in order to attract investors. This goal represents a challenge as customers demand greater value for similar or lower cost. Innovation that can shake-up the environment becomes a must for organizations that wish to distance themselves from the competition and ensure their long-term success. And that, regardless of their size or their industry. The benefits of innovation are real. The success of organizations such as Apple, Airbnb, and Amazon prove it. The steady rise in standards of living can also testify to this. However, this progress is not a coincidence, but rather an endless search to satisfy the market needs.
Although beneficial, innovation is not without risk. Why not just copy and benefit from the effort of the competition instead of innovating? In fact, simply emulating and deliberately positioning yourself behind your competition create even greater risk: becoming obsolete.
(1) ANTHONY,
© 2018, Intellia Consulting. All rights reserved
S.D., VIGUERIE, S.P., SCHWARTZ, E.I., VAN LANDEGHEM, J., « 2018 Corporate Longevity Forecast: Creative Destruction is Accelerating » Innosight Executive Briefing, (February 2018), p.3.
4
4
Introduction
Innovation, a fundamental element to organizations’ success
Companies seldom choose to innovate from a blank page. The majority of them tend to build on the gaps and strengths of existing products and services. The dominance of the "BlackBerry" has not stopped Apple from conquering the smartphone market with the "iPhone". The company has truly innovated the product by combining email, internet, music, application platform and touch interface. Regardless of the competitive strategy chosen, innovation cannot be avoided. It's about being proactive and creating an engine for growth. The purpose of this report is to provide a portrait of innovation practices in organizations and the factors that influence them. More specifically, this report presents in a pragmatic way:
• Definition of the concept of innovation;
• Perceptions of the environment • Innovation practices and techniques and;
• Proposals to move forward.
Please visit our website at intelliaconsulting.com for additional information on this report.
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Over 100 senior executives and managers of businesses of all sizes and industries working in Canada and abroad collaborated in this survey (1). We would like to warmly thank them for taking the time to respond to the survey and to discuss the subject with us. W e hope that this report will help to raise awareness among all readers of the strategic importance of innovating, and perhaps even to encourage the flexible and effective implementation of innovation processes or to increase their robustness. (1) See
Methodology p.42 for more information on the profile of respondents. 5
5
2. Highlights
Highlights 74% 74% of respondents believe their organization has met or exceeded management expectations. (page 14)
33% The potential of innovation approaches is not optimally exploited. Only 33% of respondents indicated that the innovation effort was deployed under a distinct program reporting to senior management. (page 24)
89% 89% of respondents felt that a wide knowledge of client profiles was an important opportunity. 88% of them consider that targeting well-identified segments of clientele is also important. (page 16)
Less than
25%
Less than 25% of respondents believe that their organization uses techniques specifically designed for innovation such as "Design Thinking" or "Business Model Innovation". (page 26)
75% 75% of respondents rate innovation initiatives introduced in the past three years as having a moderate or strong influence on the success of their organization. (page 19)
55% 55% of respondents believe that their company's innovation target is focused primarily on identifying and developing future activities in relation to improving day-to-day operations. The target, however, varies significantly by industry. (page 29)
91% 91% of respondents consider the availability of human resources as an important barrier to innovation. (page 21)
4.6X Respondents whose organization focuses primarily on the development of future activities are 4.6X more likely to perceive their organization as being much more capable of innovating than the competition. (page 30)
7
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3. Definition of Innovation
Definition of Innovation 3 key features: • Economically viable • Desirable for a clientele • Technically feasible
There is no shortage of definitions of the concept of innovation. Regardless of the wording chosen, 3 features are critical. Innovation is part of an economic context and is very different from invention. It must be, first and foremost, economically viable and evolve into a profitable business model. It must also create customer value (be desirable) by offering a solution to a problem in addition to being technically feasible(1). Innovation can be focused on creating or improving the resources, process or value offered(2). An innovation can also focus on a single element (product, service, process, technology) or incorporate different components of the business model or value chain(3). The more the innovation is concentrated on a limited number of elements, the more it runs the risk of being quickly copied. This is why it is generally recommended to include different elements of the business model in innovation. It renders innovation more robust and the offer more unique and attractive to the customer.
(1) BROWN,
Tim, Change by Design: how design thinking transforms organizations and inspires innovation, HarperCollins Publishers, 2009, « Getting under your skin, or how design thinking is about more than style », chapter 1, pp.18-20. (2) CHRISTENSEN, C.M., ANTHONY, S.D, ROTH, E.A., Seeing What’s Next: using the theories of innovation to predict industry change, Harvard Business School Press, 2004, « Glossary », p.293. (3) KEELY, L., PIKKEL, R., QUINN, B., WALTERS, H., Ten Types of Innovation, Wiley, 2013, « Rethink Innovation », chapter 1, p,5. 9
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Definition of innovation
Innovate for the present or for the future of the organization It has been shown that companies that work and explore along different axes (offers and markets) are more successful in managing an innovation portfolio(1). By working on both the present and future sources of growth, companies are developing strategic agility to ensure long-term success. Innovation can be incremental, evolutionary or radical depending on the degree of unknown factors and exploration involved.
Incremental innovation
A
It is possible to improve the performance of the existing offering in known markets. The current performance of the company depends on its ability to improve its offering, constantly and further satisfy its customers and respond to attacks from competitors. Evolutionary innovation (offering or market) B Innovation becomes more fundamental through adaptation and transformation of the offering or market. By considering the exploration of new markets for which it is possible to adapt and transform current products or services or by exploring a new offering in known markets, the innovation is evolutionary and requires the exploration of new avenues. This type of innovation allows the identification of the next wave of growth. Radical innovation C It is also possible to witness, although more rarely, radical innovations. These focus on the creation of a new offering and a new market to respond to a new problem. (1)
McGRATH, Rita G., The End of Competitive Advantage: how to keep your strategy moving as fast as your business, Harvard Business School Publishing, 2013, « Building an Innovation Proficiency », chapter 5, pp.101-134.
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10
For your organization, innovating means...
Although several innovation strategies can be implemented simultaneously, organizations primarily focus on product development and optimization of day-today operations.
For your organization, innovating means “fairly” or “mostly” (% respondents) Identifying / penetrating new markets
The majority of respondents believe that innovation can include several strategies. However, the importance given to each varies. In fact, 85% and 79% of respondents respectively consider that innovation means ”fairly" or ”mostly" developing new products and services or optimizing current operations. In contrast, only 55% of respondents consider that identifying or penetrating new markets defines innovation. This suggests that companies are focusing on exploring new sources of growth through known markets. A good way to maintain a leadership position in the marketplace is to make innovation more complex by combining multiple strategies simultaneously. Although the mix of innovation strategies usually depends on organizational context, a more exhaustive blend usually makes it more difficult for competitors whose main strategy is to emulate leaders.
Total
55%
Developing / introducing new products and services
Redesigning customer experience
85%
70%
Improving and optimizing current activities
79%
Acquiring new businesses, technologies, patents, etc.
57%
For your organization, innovating means “fairly” or “mostly” – By industry (% respondents) Financial services
61%
92%
92%
92%
53%
Telecom
71%
100%
71%
71%
71%
Manufacturing
38%
91%
64%
82%
54%
Health / Pharmaceuticals
25%
100%
50%
100%
75%
Media / Communication
80%
100%
80%
40%
60%
Retail / Wholesale
75%
75%
83%
92%
50%
High technology
40%
100%
60%
60%
80%
Professionnal services
75%
50%
50%
75%
63%
Public services
33%
100%
60%
100%
40%
Others
50%
80%
70%
75%
30% 11
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11
For respondents, innovating means personally...
The main keywords associated with innovation are products, customers, do better and process Most respondents also expressed the importance of the present and future dimensions of innovation. Here are some personal definitions retained: ” The transformation of an idea into a good or service for which people are willing to pay for - either by creating a new good or service or modifying an existing good or service that does not meet the requirements of its targeted audience. ” ” Clarifying, improving and optimizing current activities and associated processes, becoming a value-added partner and enhancing the customer experience. ” ” Do better, faster, and with less. "
" Be mistaken. Improve. Rework. " ” Rethink our ways of doing things and do not accept the status quo. " ” Essential progress essential to present and future success. " ” For me, innovation is first and foremost an openness that makes us aware of the changes that will inevitably affect us and that leads us to take concrete actions to remain the leader of our industry at all times. We must try to remain THE competitor who is threatening by our changes and remain more efficient than our industry. " ” Introduce new programs or processes or improve the ones we have. "
” Respond to a need that until now was not satisfied or known. ”
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4. Understanding Competitive Advantages
Satisfaction with expectations
A large majority of respondents stated that the success of their organization met or exceeded management's expectations
74% of respondents believe that the success of their organization has met or exceeded management's expectations over the last 3 years.
Assessment of the success of the organization (% respondents)
Although the overall picture is positive, the results vary from one industry to another. These percentages rise to 100% for the telecom and the public services sectors and 90% for high technology. On the other hand, these percentages fall respectively to 38% and 64% for the professional services and manufacturing sectors. This difficulty in meeting or exceeding management expectations can be an incentive to start, reorient or even reinforce an innovation process. Otherwise, it is unrealistic to expect different or even better results.
Far exceeded management expectations
12%
Exceeded management expectations
24%
In line with management expectations
38%
Below management expectations Far below management expectations
22% 4%
Assessment of organizational success judged in line or exceeding expectations by industry (% respondents) Financial services
23%
Telecom
38% 15% 43%
Manufacturing
43% 14%
37% 18% 9%
Health / Pharmaceuticals
50% 0%
25%
Media / Communication
80% 0%
Retail / Wholesale High technology
Professional services
41% 30%
20%
In line with management expectations Far exceeded management expectations
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40%
25%13%
Public services Others
25% 17%
60%
40%
23%
40%
6%
Exceeded management expectations 14
14
Potential for growth and profitability
In general, respondents depict a positive picture of the environment in which their organization is evolving.
W hile continuous innovation is relevant, the fact remains that evaluating the merit of a new idea is crucial. Does this address a customer need for which the latter is willing to pay in the near future? If so, a company will see good growth and profitability potential. If not, the company will be more inclined to look for other potential ideas.
Assessment of the potential of the organization's environment (% respondents)
65% of respondents believe that their organization is evolving in a "high and very high potential" growth and profitability environment. These organizations have the objective of exploiting meritorious avenues of innovation already well identified while the other portion of the respondents (35%) could opt to invest in research and the identification of new avenues of innovation.
Respectively 100% and 86% of respondents in the health / pharmaceuticals and telecom sectors see a "high or very high potential" for growth and profitability. These percentages fall to 61% and 60% for the financial services and public services sectors.
Very high potential
20%
High potential
45%
Weak potential
Very weak potential
32% 3%
Assessment of the potential of the environment deemed "high" or "very high" by industry (% respondents)
Financial services
46%
Telecom
15%
Manufacturing
55%
18%
Health / Pharmaceuticals
75%
Media / Communication Retail / Wholesale High technology
67% 20%
50% 63% 13%
Public services Others
High potential
25%
40%
40%
Professional services
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29%
57%
60% 31%
20%
Very high potential
15
15
Threats and Opportunities
Respondents see internal factors as opportunities with better impacts and higher probabilities of being realized Assessment of opportunities and threats being rated "moderately" or "very significant" and associated probability of realization (% respondents)
89% and 88% of respondents respectively see a wide knowledge of client profiles and the identification of customer segments as significant opportunities to be exploited. Their probability of being realized is considered high by 70% and 66% of respondents.
Hilton's success in the hospitality industry is a testimony to these results. While its brands "Waldorf Astoria" and "Hampton Inn" cater to a distinct clientele seeking luxury and comfort respectively, Hilton has recently launched a new channel "TRU". It targets a younger clientele with a more limited budget, without compromising on quality. Not only is "TRU” a great success, this brand could retain its new segment whose financial resources will increase in the future. Conversely, 82% of respondents believe that the entry of new competitors offering products and services at lower prices is a significant threat with a probability of realization of 50%.
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Degree of urgency and reaction time
90% of respondents recognize the urgency of responding to opportunities and threats
Degree of urgency to react to opportunities and threats (% respondents) 2%
1%
7%
Very urgent 31%
Fairly urgent Somewhat urgent Not urgent
59%
Delay required to react to opportunities and threats (% respondents) 3%
6%
9% Less than 6 months
From 6 to 12 months 30% 52%
From 1 to 3 years From 3 to 5 years Do not know / Not applicable
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90% of respondents believe that it is "very urgent or fairly urgent" to react in order to seize opportunities and address environmental threats. This result reveals heightened awareness. Staying alert to understand and respond quickly to changing market needs avoids the biggest pitfall for any business: becoming obsolete. However, 58% of respondents say they require a period of at least one year to respond to opportunities and threats. The effort and time needed between generating ideas and marketing them cannot be ignored. This is even more true considering that many ideas will be abandoned along the way because of low market potential or even feasibility. Innovation is important at all times. If it becomes an urgent priority, when the company is already experiencing a substantial decline in the market trying to make a serious catch-up cannot only be painstaking but also fruitless(1). In order to optimize the alignment between the urgency of a situation and the time required to act appropriately, several companies drive their innovation process in a continuous and ongoing way. As opportunities and threats are frequent and varied, building a constant portfolio of innovative ideas of different types and with different timelines allows for thoughtful action and value creation.
(1)
PHILLIPS, J., «Why Urgency is the Most Important--and Overlooked--Element of Innovation », (November 1, 2017), https://www.inc.com/jeffrey-phillips/this-is-how-tomake-innovation-urgent-important.html 17 17
5. Innovation and Success
Current success of organizations and innovation
In general, respondents recognize the positive impact of innovation on the success of their organization
Degree of influence of innovation on the success of the organization over the past 3 years (% respondents)
W hile many factors can contribute to an organization's success, innovation is of great importance. To expect achieving different or even better results without introducing significant changes in business practices and the value proposition is hard to imagine.
Strongly influenced its success
1%
Moderately influenced its success
6% 18% 41%
Somewhat influenced its success Not influenced its success
34%
Do not know / Not applicable
75% of respondents say that innovation has ”strongly or moderately" influenced the success of their organization. Since we previously mentioned that 74% of respondents consider meeting or exceeding management expectations, it is difficult to deny the correlation between innovation and goal attainment. Conversely, the innovation experience was less successful for 25% of respondents indicating the risks inherent in innovating. The ability to innovate can also vary from one organization to another.
19
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Innovation capacity
Industry sector influences respondents' perception of the capacity to innovate
71% of respondents believe that their organization is "much more capable or more capable" than the competition is to innovate. This percentage indicates a very optimistic perception where a result of 50% would be mathematically more realistic since the reference population remains the same for all players within the same niche.
Assessment of the capacity to innovate compared to the competition (% respondents)
Considering different industries, we find that 90% and 86% of respondents in the high technology and telecom sectors believe that their innovation capacity exceeds that of the competition. On the other hand, only 45% and 50% of respondents in the manufacturing and professional services sectors have a greater ability to innovate than the competition.
Comparing these results with those of reaching and exceeding the expectations of management presented on page 14, it is possible to see a very strong link. Indeed, industries with a greater capacity to innovate seem to better meet or exceed expectations. Inversely, those who do not have the same capacity, do not meet management expectations as frequently.
Much more capable than the competition
22%
More capable than the competition
49%
Less capable than the competition
23%
Much less capable than the competition
3%
Do not know
3%
Ability of the organization to be "more capable" or "much more capable" of innovating than the competition (% of respondents) Financial services Telecom
50%
25%
75% 8%
Much more capable than the competition
50%
40%
Professional services
Others
20%
60%
Retail / Wholesale
Public services
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36% 9%
Media / Communication
High technology
29%
57%
Manufacturing Health / Pharmaceuticals
15%
54%
50% 40%
40% 44%
22%
20 More capable than the competition 20
The obstacles of innovation
The availability of skilled human resources is the biggest obstacle to innovation
Barriers to innovation considered "moderately" or "very important" (% respondents)
The success of innovation is not without obstacles. The availability of human resources and the lack of internal skills come first and third respectively. The fact that resources are already occupied on daily operations is a "moderate" or "very important" obstacle for 91% of respondents. It can be difficult and even impossible for those dedicated to day-to-day operations to provide the time needed to seriously undertake innovation activities. These may require a step back and can sometimes be perceived as a hindrance to the achievement of operational results that must be periodically and quickly achieved. W hile it may be financially tempting for companies to assign resources to innovation that typically work in day-to-day operations, opportunities to develop specialized teams internally or negotiating external partnerships may be helpful. The lack of budget comes in 2nd place. Innovation becomes crucial when the growth vectors of an organization show signs of slowing down. However, the results show that resisting the temptation to cut innovation budgets for the sake of short-term profits remains a challenge.
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6. State of Innovation Practices
Attributes of innovation
Overall, respondents believe that their innovation process is quite robust
Assessment of the robustness of the attributes of innovation (% respondents)
Robustness In order to profile the nature of innovation processes currently in place in organizations, eight attributes were surveyed. Although the interpretation of the results may depend on the organizational context, the rating scale suggests that a positioning furthest to the right denotes a more robust process. The majority of respondents rated their innovation process as between the median and the extreme right of the scale for seven out of eight attributes. The exception concerns formalization, which nevertheless contributes to increasing the credibility and efficiency of the innovation process. When the latter is perceived as a series of abstract and unrelated activities, the motivation of the participants and the results of innovation suffer. Defining and communicating a global vision of innovation by senior management, systematizing the process and setting measurable goals engages teams and promotes better results.
23
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Note: See appendix (p.45) for the definition of attributes
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The potential of approaches to innovation is not fully exploited
Use of implementation approaches Use of implementation approaches (% respondents)
Although for many, innovation is often akin to generating better ideas, the fact remains that achieving them is a greater challenge. More and more, we are talking about innovation culture and no longer of an ad hoc process. Some key approaches can foster the introduction of this culture of innovation.
Organization of the program Under distinct, multidisciplinary Within regular functional teams that collaborate with various teams functions
Organization of the program
33%
67% 100%
0%
100%
Budget allocation Substantial with the hope that Tight and allocated on the ROI is sufficient once experimentation and validation initiatives are concluded results
37% 100%
63% 0%
Only 33% of respondents indicated that the innovation effort was supported by a distinct and multidisciplinary program. Since an organizational culture is initiated by management, integrating innovation objectives into the strategic plan allows for better positioning. The adoption of human and financial performance management practices adapted to the uncertain, iterative and risky context of innovation also favors the coherence of efforts invested. Budget allocation
63% of respondents indicated that innovation budgets are allocated on the progress of experimentation and validation. This good practice minimizes the risk of wasting large sums of money on misguided priorities. While recognizing the iterative nature of innovation, it is important to know how to stop nonviable innovation initiatives as soon as possible in order to limit financial loss.
100%
24
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The potential of approaches to innovation is not fully exploited
Use of implementation approaches
Linear or iterative
Linear or iterative
Iterative
Linear
34% 100%
66% 0%
100%
Assignment of Human Resources Regular functional teams
Distinct and multidisciplinary teams
49%
51% 0%
100%
100%
Focus of measures and targets On financial results only
On a balance between tangible and intangible measures
49% 100%
51% 0%
100%
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66% of respondents indicated that they had adopted an iterative innovation process facilitating exploration and experimentation. This approach makes it possible to test, abandon and adapt many ideas before launching on a larger scale. The current trend of innovation is to keep an external focus on the customer whereas traditionally it was focused on R&D. This change requires an iterative effort to continually take into account the client's response and meet the needs of the market. Assignment of Human Resources
51% of respondents indicated that innovation activities are supported by dedicated, distinct and multidisciplinary teams that collaborate with the different functions of the company. Regular teams with the dual responsibility of maintaining current operations and achieving innovation goals may lack the time or even the necessary expertise. Mobilizing these distinct teams to innovate addresses significant barriers to resource availability and skills. Focus of measures and targets
51% of respondents indicated that innovation measures and targets focus on a balance between tangible and intangible outcomes. This practice makes it possible to measure progress through phases of innovation that can extend over months or even years. Measures such as the number of ideas generated, the % of ideas explored or the time required for validations with clients, make it possible to evaluate the health of the process throughout the journey. Financial measures such as return on investment (ROI) and net present value 25 (NPV), while relevant, may be late. 25
Use of techniques and methodologies
Although idea generation and client needs observation / identification sessions are relatively well used, other relevant innovation techniques are not.
Techniques and methodologies used by organizations (% respondents) Clients' needs observation / identification techniques
34%
Idea generation sessions (brainstorming)
35%
Prototype elaboration / Fab Lab Agile method
34% 34%
27% 14% 23% 16%
Design Thinking / Living Lab 13%
8%
Business Model Innovation 17%
7%
Lean Startup 9% 3% Lean 15%
13%
Six Sigma 15%
11%
Often used
Systematically used
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Organizations do not lack good ideas. Their challenges are rather related to the difficulty in the continuous and ongoing subsequent effort required to implement them. In fact, 69% of respondents state that their organization often or systematically uses idea generation sessions, whereas this percentage is 68% for the observation / identification of client needs.
In contrast, laboratory prototyping techniques and the agile method needed to validate the feasibility of achieving the best ideas are "often and systematically" used by only 41% and 39% of organizations, respectively. Although Design Thinking, Business Model Innovation, and Lean Startup techniques can support the entire process from idea to market, none of them are "often or systematically" used by more than 24% of organizations. Yet, in a context of evolutionary or radical innovation, these techniques reduce the risk of misguided large-scale marketing efforts which could be disappointing. In another context, where an organization aims for more incremental innovation or even optimization of its day-to-day operations, methods such as Lean and Six Sigma may be relevant to improve the efficiency of operations. Surprisingly, these are often and systematically used by less than 30% of organizations. Note: See Appendix (pp.43-44) for definitions of techniques and methodologies. 26
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7. The Ambition of Innovation
The importance of targets
Innovation targets coexist and their prioritization guides the approaches, techniques, and methodologies implemented
Organizations can innovate by selecting different targets. However, whether they focus on optimizing current activities or identifying and developing future activities, organizations cannot avoid the duality of these two targets. Depending on its strategic choices, an organization may focus on one or the other of these targets, while avoiding too much polarization. Focusing only on current activities at the expense of exploring future growth drivers would lead an organization to a slow death. In contrast, focusing only on future activities would mean rapid death. Obviously, the number of unknowns and nature of risks will be different depending on the innovation targets. The exploratory nature of the development of future activities requires approaches different from those used for the optimization of current activities. The results of our study tend to show that these differences and the choices associated with them affect the robustness of the innovation process and the resulting success.
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Innovation targets vary by industry
It is possible to notice different innovation targets by industry group
Innovation targets by industry (% respondents)
Although the overall distribution of respondents according to the two innovation targets is relatively similar (41% - 55%), it is interesting to observe the extent to which each industry focuses its efforts on both targets. The dynamism of each of the industries can be a significant factor of influence.
Targets per industries
Current activities
Future activities
Total Respondents
41%
55%
Financial services
46%
54%
Teleoom
14%
86%
Manufacturing
64%
36%
Health / Pharma
50%
50%
Media / Comm.
20%
80%
Retail / Wholesale
75%
8%
High technology
10%
90%
Professional services
37%
63%
Public services
60%
40%
Top three industries with the highest percentage by target
The main industries that respondents say focus primarily on the identification and development of future activities are high technology (90%), telecom (86%) and media / communications (80%).
Those industries that focus mainly on improving current activities include the retail and wholesale sector (75%), the manufacturing sector (64%), and finally the public services (60%). The results also demonstrate the duality of innovation targets for each of these industries. Thus, for many respondents, focusing on a target does not mean that the other is unimportant. To the contrary, this duality helps ensure the viability, sustainability, and differentiation of organizations.
Note: For some industries, a small percentage of respondents are at 50% / 50%
29
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29
Organizations that focus on identifying and developing future activities seem to gain an undeniable advantage
Targets of innovation and success Elements of success by innovation targets (% respondents) Current activities
Future activities
Differ.
Success significantly superior than expectations
7%
16%
2.3X
Respondents whose organizations focus on identifying and developing future activities are more likely to rate the success of their organization significantly higher than expected (2.3X). They are also 3X more likely to rate growth potential as very strong compared to those whose organization focuses on the improvement and optimization of current activities.
Very strong potential growth
10%
3X
Respondents also indicated that innovation has a very strong influence on the success of their organization (2.6X) and consider that the latter is much more capable of innovating than their competitors (4.6X).
Success elements
Very strong Influence of innovation on success
21%
Much higher capacity to innovate
7%
30%
55%
32%
2.6X
4.6X
Time to react to opportunities and threats (12 months and less)
33%
45%
1.4X
Resources very busy on day-to-day operations
81%
61%
-1.3X
Finally, these same respondents were more likely to claim that their organization can react more quickly (less than 12 months) to perceived opportunities and threats from the environment. However, obstacles to innovation are very real for respondents. By observing how they face the main constraint on the availability of resources, it is possible to note that those who focus on future activities are less affected (-1.3X). The innovation target has an important influence on all of the success elements of the organization we measured.
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The innovation target influences the robustness of the innovation process
Attributes reflect more robust practices Attributes of innovation according to targets (% respondents) Current activities
Future activities
Differ.
Rhythm (systematic)
21%
36%
1.7X
Respondents whose organizations focus on identifying and developing future activities more positively characterize their innovation attributes. Although all of the robustness attributes are judged more advantageously, some have larger deviations:
Articulation and structure (very well)
14%
29%
2.1X
• 2X more respondents rated their innovation process as very well articulated and structured;
Formalization (institutionnalised)
12%
18%
1.5X
Complexity (simple)
26%
34%
1.3X
Effectiveness of exchanges (more effective)
12%
45%
3.8X
Clarity of actions (very clear)
12%
21%
1.8X
Relevance of actions (very feasible)
19%
23%
1.2X
Achievement of results (better than expected)
7%
18%
2.6X
Innovation attributes
• nearly 4X more respondents think exchanges are more effective; and
• nearly 3X more respondents consider their innovation results better than expected. Organizations that focus on identifying and developing future activities appear to demonstrate a more robust execution of innovation.
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Implementation approaches are different
Different innovation targets influence approaches to implementation
Uses of implementation approaches by target (% respondents)
The ability to generate more satisfactory results through innovation is a consequence of the different approaches implemented. Organizations that primarily target the identification and development of future activities tend to choose practices that allow them to explore and better pilot their innovation approaches.
Organization of the program Within regular functional teams
24%
76% 100%
Under distinct, multidisciplinary teams that collaborate with various functions
62%
38%
100%
Budget allocation Substantial with the hope that Tight and allocated on the ROI is sufficient once experimentation and validation initiatives are concluded results
24% 100%
47%
76% 53%
100%
Innovation initiatives focusing on Improvement and optimization of current activities Identification and development of future activities
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Organization of the program
38% of companies whose innovation focuses on the development of future activities tend to introduce separate innovation programs. This percentage falls to 24% for those who focus on the optimization of current activities. The reality of organizations makes it very difficult to liberate resources for innovation initiatives. These remain relatively dependent on day-to-day operations for both groups of respondents. Budget allocation
53% of companies whose innovation focuses on the development of future activities tend to allocate their innovation budget according to the progress made against 76% for those who focus on the optimization of current activities. This surprising result indicates that the presumption "future-oriented innovations equal big budgets" is still alive and well. Companies have everything to gain by testing and validating the results confirming the feasibility and adoption of the small-scale market before investing large sums. However, this type of budget allocation requires more dynamic management than the traditional annual horizons often put in place in companies. 32 32
Different innovation targets influence approaches to implementation
Implementation approaches are different Linear or iterative
Linear or iterative
Iterative
Linear
50%
50% 77%
23%
100%
100%
Assignment of Human Resources Distinct and multidisciplinary Regular functional teams teams
55% 100%
45%
46%
54%
100%
Focusing measures and targets On financial results only
62% 100%
On a balance between tangible and intangible measures
38% 41%
59%
100%
Innovation initiatives focusing on Improvement and optimization of current activities Identification and development of future activities
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77% of companies whose innovation focuses on the development of future activities tend to adopt an iterative process. This percentage falls to 50% for those who focus on the optimization of current activities. Regardless of the target, a large number of companies recognize that innovation requires an iterative approach given the exploration and validation activities inherent in trying to predict the future. Assignment of Human Resources
54% of companies whose innovation focuses on the development of future activities tend to mobilize distinct and multidisciplinary teams. This percentage falls to 45% for those who focus on the optimization of current activities. The richness of the contribution of a team that can analyze and integrate different perspectives is crucial when you think outside the box. Focusing measures and targets
59% of companies whose innovation focuses on the development of future activities tend to use a balance of tangible and intangible measures. This percentage falls to 38% for those who focus on the optimization of current activities. The exploratory nature of the activities of the first group thus requires a large number of predictive and non-financial measures (number of ideas generated,% of the ideas being explored, prototyped or marketed). It may also be relevant to measure the culture of innovation using the % of time invested by managers, the % of employees trained on the concepts of innovation or the degree of risk tolerance. 33 33
Techniques and methodologies are different Degree of use of techniques and methodologies based on innovation targets (% respondents) Often – Systematic Techniques and methods
Do not know – Not applicable
Current Future Current Future activities activities activities activities Group 1
Different innovation targets influence the nature and variety of techniques and methodologies used
The techniques and methodologies used by organizations focusing on the identification and exploration of future activities are more varied and more focused on the exploration of customer needs. These methodologies also make it possible to rapidly validate the various assumptions underlying the innovation process and, consequently, promote a reduction in risk while accelerating learning.
Clients’ needs observations / identification techniques
52%
81%
12%
4%
The table presents the main techniques and methodologies "often or systematically" used by companies. It can be noted that for all 9 techniques, the level of use is higher among companies focusing on future activities and the level of "do not know" is generally lower.
Idea generation sessions (brainstorming)
57%
79%
5%
2%
Group 1: Observation Techniques – Idea Generation Sessions
15%
12%
Group 2 Prototype elaboration / Fab Lab
27%
Agile method
24%
51%
50%
17%
11%
Often implemented as a starting point for innovation approaches, these techniques and methodologies are well known and widely used by both sets of respondents. Organizations that prioritize future activities have a higher level of use of the techniques in this group. Group 2: Prototype Elaboration - Agile Method
Respondents prioritizing future activities are twice as likely to mention the use of these techniques. This result shows a strong link with industries favoring future activities (high technology, communications / media, telecom). Indeed, they are major users of methodologies for prototyping and validating ideas and progress with customers. 34
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Techniques and methodologies are different Degree of use of techniques and methodologies based on innovation targets (% respondents) Often – Systematic Techniques and methods
Do not know – Not applicable
Current Future Current Future activities activities activities activities Group 3
Design Thinking / Living Lab
10%
30%
27%
20%
Business Model Innovation
22%
26%
24%
19%
Lean Startup
5%
18%
24%
27%
Different innovation targets influence the variety of techniques and methodologies used
Respondents expressed less knowledge and less use of Groups 3 and 4 techniques and methods compared to Groups 1 and 2.
Group 3: Design Thinking - Business Model Innovation - Lean Startup
The exploratory nature of these emerging techniques would explain why respondents prioritizing future activities are up to 3X more likely to say that their organization uses these techniques. Compared to other groups, there is a higher rate of respondents saying "do not know", suggesting an interesting potential to exploit. Group 4: Lean - Six Sigma
The low level of use that both sets of respondents have expressed regarding these known improvement techniques is surprising. These results suggest an untapped potential for many organizations wanting to maximize the value of ongoing operations. Requirements and levels of use
Group 4
Lean
27%
30%
20%
13%
Six Sigma
22%
30%
17%
14%
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It is interesting to note the differences between the levels of use of the techniques and methods of the groups presented. Those of Group 1, which can be used to initiate an innovation process, are better mastered and more used. The techniques and methods in Groups 2, 3 and 4 are more elaborate and require continuous use in order to reap full benefits. The requirements necessary to implement the methodologies of these last three groups would explain their lower level of use.
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8. Proposals to Move Forward
10 proposals to move forward
1
2
3
Continually monitor the environment
Define innovation objectives adapted to the situation
Include innovation objectives in the strategic plan
Continually monitor and understand opportunities (changes in customer needs, new markets, new offerings, etc.) and threats (competition, disuse of supply, etc.) that arise from the environment. Develop a realistic portrait of the organization's positioning by assessing the strengths and points to be developed.
Develop the ambition to stand out in the market. Evaluate the appropriate mix between optimization of current operations and exploratory development of future growth drivers. Evaluate the completeness and necessity for innovation processes by combining different perspectives (market, supply, business model, etc.)
Include innovation objectives in the organization's strategic plan in order to achieve them. The board of directors may also ask the management team to maintain a dual focus of innovation targets. All in order to prevent pressures from current activities on limiting the development of future activities.
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10 proposals to move forward
4
5
6
Develop a culture of innovation conducive to experimentation
Protect human resources dedicated to innovation
Develop a mastery of innovation practices and methodologies
The effectiveness of innovation depends on its being a continuous effort. A one-off or isolated effort cannot address constant change. Since success does not come from a single good idea, it is important to promote a culture conducive to exploratory, iterative and validation work with the client. The focus must be on learning.
As resource availability is the biggest hurdle, mechanisms to liberate necessary resources must be introduced. Creating a formal program to which the workforce will relate can limit the negative impacts of daily and operational priorities. Being associated with the innovation program must be valued, recognized, and rewarded.
The challenge of innovation rarely comes from a lack of ideas but rather from the activities needed to realize them. Methodologies such as "Business Model Innovation" or "Design Thinking" offer tools that help to clarify, validate and prototype new ideas in a systematic and rapid way.
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10 proposals to move forward
7
8
9
Define the structures needed for innovation
Manage the execution risk of innovation
Measure the performance of innovation
In line with the inclusion of innovation goals in the strategic plan, it is critical that senior management can relate to the innovation agenda. Multidisciplinary teams and separate budgets should be dedicated to this program to reduce the impact of organizational silos and facilitate decision-making.
All ideas generated cannot be implemented. It is necessary to reduce the risk and uncertainty of any new idea by prototyping the feasibility and testing the customer's interest as quickly and cheaply as possible. The goal is to develop the most promising ideas and to abandon nonviable pursuits.
The innovation process can span several months or even years. It is important to select suitable indicators that measure progress throughout the process. It is also appropriate to measure the readiness of the organization to innovate including, in particular, the performance management program of the teams necessary to encourage desired behaviors.
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10 proposals to move forward
10 And finally…. Act now while there is still time
Regardless of the situation, the potential of the opportunities, the severity of the threats, the industry or the stage of maturity of the organization, the goal is to act before it is too late. Acting when the organization's performance is healthy encourages proactivity and increases the chances of getting ahead of the competition. Developing a competitive advantage, whether from an innovation focused on future actions or optimization of operations cannot be achieved without providing the necessary time. Reacting in panic mode can lead to disappointing or even unfortunate results. Do not wait until it is too late.
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9. APPENDICES
To find out more about enterprise innovation today, Intellia Consulting asked more than 260 executives and management team members to answer a questionnaire. The objective was to document, better understand and demystify innovation practices in a pragmatic and empirical way to help companies improve the
Methodology
Industry distribution
Size distribution
identification and construction of competitive advantages. For this purpose, the questionnaire consisted of 35 questions of different types (multiple choice, evaluation scale questions, open questions). The results presented in this report are drawn from the 110 responses collected. The profile of the respondents is as follows: Geographic distribution
4% 13%
19%
25%
23%
12% 44%
48% 4%
11%
20%
13% 25%
10%
12%
8%
7%
2%
Less than 10 employees More than 10 but less than 100 employees
Financial services
Global
Telecom / Média / Commun.
International - Americas
Manufacturing
More than 100 but less than 1,000 employees
Retail / Wholesale
More than 1,000 employees
Professional / public services
High technology
Health / Pharmaceuticals Others
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International - Europe International - Asia- Oceania Africa - Middle East Pan-Canadien - National Quebec - Provincial - Regional 42
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Definition of innovation techniques Group 1: Observation Techniques – Idea Generation Sessions
Observation Techniques / identification of customer needs
A technique to systematically analyze the met or unmet needs of clients through questionnaires, interviews, coaching programs and evaluation grids. The goal is to identify what the customer is not always able to clearly express.
Idea Generation Sessions (brainstorming)
A technique used by a group of participants to generate and exchange ideas and creative solutions. All are invited to think aloud and suggest a maximum number of ideas regardless of the odd or unusual nature.
Group 2: Prototype Elaboration - Agile Method
Prototype Elaboration / Fab Lab
Agile Method
A technique to construct or reproduce an incomplete and non-definitive copy of what may be the final product or object. Everything can be done in a specialized laboratory for this purpose. Digital manufacturing software and the specific materials provided can help build just about anything.
A technique to involve a customer in a sustained way from the beginning to the end of a transformation project in order to capture the evolving needs of the client. This technique favors an iterative and incremental approach.
Group 3: Design Thinking - Business Model Innovation - Lean Startup
Design Thinking / Living Lab
A technique used by designers to solve complex problems and generate desirable solutions for customers. This technique based on intuition and exploration includes the phases of empathy, problem definition, idea generation, prototyping, validation, and implementation. 43
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Definition of innovation techniques Group 3: Design Thinking - Business Model Innovation - Lean Startup (cont’d)
Business Model Generation
Lean Startup
Group 4: Lean - Six Sigma
Lean
Six Sigma
A technique including methodologies and frameworks that systematically help to understand, conceptualize, improve and implement business models that can change the rules of the game. For this, the technique leads to a fundamental understanding of the value proposition as well as the customers, distribution networks, partners, sources of revenue and costs.
A technique associated specifically with the start of an economic activity or a product launch in an uncertain or volatile environment. It is based on scientific experimentation, iterative conceptualization, regular measurement of progress and obtaining rapid feedback from clients. The goal is to respond optimally to customer demand by minimizing the initial investment.
A technique to improve the performance of production processes including inventory reduction, waste management, defect reduction, just-in-time use, time control, effective skills management and cost reduction. A technique used to reduce the rate of variability and therefore of the defectiveness of all products resulting from repetitive tasks (often associated with production). This technique is based on the goal that everything that is produced is positioned within a Six Sigma range in relation to the overall average. 44
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Definition of attributes Eight attributes were surveyed with respondents In order to portray the perception of the innovation process in organizations, eight attributes were surveyed. Although results may depend on the context of the organization, the evaluation scale presented in the report assesses the robustness of the innovation process.
Attributes
Definition of the attribute
Rhythm
Refers to the degree of frequency and regular recurrence
Structure
Refers to the degree of coherence and articulation of the approach
Formalization
Refers to the degree of systematization of the process, use of rules and evaluation measures
Complexity
Refers to the difficult, complicated and confused nature of the process
Effectiveness of meetings
Refers to the perception of the impact of any form of meetings on the progress of work
Clarity of actions
Refers to the unambiguous nature of the actions to be completed
Relevance of generated actions
Refers to accessibility and feasibility of defined actions
Achievement of results
Refers to the degree by which desired results are attained or even exceeded
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About Intellia Consulting
Strategy, innovation and business transformation Our mission
Helping companies innovate, be unique and perform
Since 2002, we assist management teams in the design and transformation of their organizations to:
• • • • • •
Increase profitability; Explore sources of growth; Improve customer satisfaction; Increase performance and efficiency; Reduce risks; Increase organizational agility.
Our fields of intervention
Our integrated perspective on the organization allows us to focus on aligning operations with business strategy to maximize value creation. Our fields of intervention are: • • • •
Strategy and innovation; Client experience; Supply chain; Financial performance transformation.
Visit us • www.intelliaconsulting.com
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Contact Information
Eric L’Heureux, MSc Senior Partner
[email protected] (514) 910-4861
Linkedin: linkedin.com/in/ericlheureux Twitter: @EricLHeureux
Partner
[email protected] (514) 895-6772 Linkedin: linkedin.com/in/michele-gagné
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