Innovation Governance: The Key to Effective Digital Initiatives

Mar 15, 2019
There are few concepts more overhyped and less understood than innovation. Digital transformation, AI, and blockchain are not far behind. But I’d like to cut through the usual talk about how you should do things differently and give you something concrete. 

I’m going to share what I think is the best approach to innovation if you want results: innovation governance.

To start, most people get innovation wrong. Because they think it’s something that can be formalized with rigid methodologies such as those used in accounting or quality assurance processes. Yes, there are plenty of papers on how to structure innovation processes, but they are often no better than how-to books on becoming songwriters or novelists. It’s unlikely that you’ll become a John Lennon or a Gabriel Garcia Marquez just by reading a book.

Innovation is not manufactured. It is invented. Through a combination of serendipity and awareness. 

Serendipity is the creation of ideas that happen when they happen. Besides designing an environment that encourages the expression and sharing of ideas, there is little that a business can do to foster invention. 

Idea generation is one thing, but awareness—knowing how to apply the idea—is where the proverbial secret sauce is at. 

The opportunities in this era of digital transformation are vast because many digital initiatives involve not just a complete rethinking of technology, but business processes as well. Maintaining a focus on innovation during a digital initiative can help spark new features and improve a business’s competitiveness. 

Consider the wheel

The wheel is probably the most important invention in human history. Depictions of Sumerian chariots pulled by horses point to its invention in Mesopotamia at least 5,000 years ago. But the Aztecs, a sophisticated civilization by all accounts, had also invented the wheel independently. The difference is that the Aztecs never used the wheel for transport, only for making children’s toys. 

Some suspect explanations are that wheeled carriages would have been impractical in the mountainous terrain of central Mexico or that the Aztecs lacked access to horses, oxen, and other animals capable of pulling a carriage. Still, the fact is that every known wheeled children's toy is that of an animal on wheels, and that no toys representing carriages on wheels have been found. This suggests that the idea to use carts with wheels as a form of transportation simply did not occur to them. They had the serendipity to invent the wheel, but not the awareness to use it.
 
This lapse of awareness happens more often than you think. After all, wheeled luggage was not invented until 1970. How could something so obvious not be invented earlier?

More importantly: how can we effectively foster innovation?

As I mentioned in the beginning, the usual efforts to generate ideas—whether it’s a suggestion box or a social media voting tool or some idea management software—won’t cut it. We also need awareness. We need a team that will assess the catalog of ideas and explore their potential application to the business in a more disciplined and structured approach.

Innovation governance done right

Short of establishing an R&D department, which is out of reach for most organizations, the best way to effectively foster innovation is with an innovation focus group. A multidisciplinary group representing a cross section of your business that meets periodically to evaluate new innovation opportunities. 

The innovation group has two main objectives:

First, identifying value in emerging technologies. As a new technology comes along, the group will investigate its suitability as a potential source of innovation. For example, can the blockchain algorithm and the proof-of-work concepts devised for Bitcoin be used to create new sources of revenue for our web services? Which areas of the business can we transform with machine learning? What mobile technologies can we leverage to improve customer service? 

Second, separating hype from reality. After the initial investigation, the innovation group will then select ideas for further analysis based on their potential business value. Here, the group should aim to identify the benefits that could be derived should the idea prove feasible. 

A reasonable degree of innovation should also take place within the focus group itself as ideas are tested against a variety of possible uses. It is to be expected that only a small fraction of ideas will move forward. In my experience, usually no more than 5% of submitted ideas are worth further consideration at this point. 

If the innovation group likes an idea, it will then assign one of its members as an idea champion, who will then engage a subject matter expert (SME) to validate it. A crazy idea may still make it through if its impact is significant enough, but by engaging an SME, the organization can avoid pursuing unrealistic, “boil the ocean,” ideas.

Once an idea is deemed feasible, it falls to the idea champion to further analyze the idea and estimate its business value. Here, development and implementation costs, ROIs, and realistic deliverable timeframes are essential. 

Finally, when an idea is approved, it can be treated the same as any other agile-based project and be moved to the prototype stage. However, the success of an idea will still depend on the prototype validating the original premises and in securing the required investment.

So, there you have it. There is no need for gimmicks. 

It’s true that the best ideas are often the simplest ones, like the wheel appearing at just the right time. However, if you want to benefit from innovation, you should do more than merely hoping for the best. You must be ready to consider many ideas and be prepared to exploit the few that offers promise.

While there is no recipe for innovation, an environment that fosters open thinking and the expression of ideas, combined with an innovation group that tracks, evaluates, and champions new ideas will make innovation and its business benefits much more achievable. 

Then again, a little bit of luck never hurts. Serendipity awaits.

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