Reinvent the Innovation System in an Established Organization
One of Europe’s leading food & beverage players has established itself in the production, development and trading of food products as well as complementary equipment to the core product.
The multinational has a consumer-centric approach and designs its processes from the product development stage to the after-sales stage with a focus on customer service level excellence. Over the last few years, the company has experienced marked growth.
Aiming to give the employees a voice within the organization, the company created an idea development program for new products or services – the Beta Program.
Value creation from this program represented 2% of the company’s total turnover. The launch cycle for new products exceeded 3 years, and the volume of ideas generated by the employees was low – not being transversal to all areas of the company, compromising the success of this initiative.
The improvement system in place at the company was outdated and did not contribute to the progress of the different business units.
The company’s goal is to double its annual turnover, from £400M to £800M, with 50% of this growth coming from innovation.
To keep up with the current growth of the company, it is necessary to redesign the innovation system to generate more ideas with higher added value for the customer, while reducing the time-to-market of the product. The current innovation system of the company was mapped to identify the areas with the most opportunities for improvement as well as the set of strategic actions to be carried out in each one of them.
Disruptive innovation, which has a high threshold of rigor, was the main focus. This was followed by the innovation system model which is organized into 3 core areas: innovation strategy, innovation processes and innovation management.
- Innovation strategy
The company’s current strategies and some of the business areas needed to be improved urgently. The concept of innovation within the company was generally vague and did not provide clarification to the staff about the importance of the innovation projects.
The innovation process consists mainly of developing incremental improvements to the current product – rather than creating new products or even new business areas. The risk avoidance prevented the choice of strategies closer to the company’s core, which despite being riskier, would have a higher return. The acceptance of this risk is a key factor for the company to achieve the expected growth.
The lack of knowledge about the consumer profile hindered the development of successful innovations for the company. During the business growth stage, the company focused on the intermediary product offering which prevented contact with the final consumer, compromising its ability to satisfy its customer needs.
- Innovation management
The lack of metrics to analyze the success of each innovation undermined the company’s ability to evaluate its performance and the development timeframe.
The sale of products or services derived from innovation was not a priority for the organization – a result of the lack of alignment between the organization’s efforts and the results achieved. For innovation to be part of the organization’s daily routine, it must be integrated into the daily activity of the staff and aligned with the strategic growth targets of the company.
- Innovation process
The company’s innovation strategy was based on the search for solutions and not on problems that needed to be solved. Thus, the innovation developed did not yield positive results because the final product or service was not key for solving problems for the consumer. Also, the search for new ideas was time-consuming, and required an unsustainable time horizon for implementation, with a minimum of 3 years until they reached the market.
Internal challenges for the staff regarding the development of ideas were not specific, and there was little clarity in presentation, having consequences for the quality of the ideas proposed. It is necessary to ensure management involvement in the company’s innovation efforts, from product ideation to market entry, given its influence on the motivation of the team allocated to the project.
Courses of action
After the analysis of the current innovation model, both in terms of results and processes, an improvement proposal was developed aligned with the expected goals of the organization, and concrete actions were defined for the different stages of the company’s innovation process.
- Redefinition of the company’s innovation concept
Before implementing an innovation strategy, it is necessary that the entire company understands and accepts its ramifications for the daily life of the organization. This requires allocating each of the company’s current innovation projects to the different innovation horizons. The organization’s innovation efforts are analyzed, and next steps defined accordingly.
Based on the three innovation horizons, the company’s current projects were allocated to each: Horizon 1 – the incremental improvement of existing products; Horizon 2 – the creation of new products; and Horizon 3 – the reinvention and creation of new markets. Given the company’s strong brand representation presence, a fourth horizon was added – Novelties.
According to the 3 Innovation Horizons plan defined, the introduction of a continuous improvement pilot project is foreseen within each innovation horizon. This process ensures the systematic improvement of the results of each innovation, and follows each project from the current state analysis, and improvement opportunities identification, to the quantification of the benefits of those improvements for the business.
- Innovation needs a leader
The successful implementation of innovation strategies requires the democratization of the process and acceptance by all those involved. Therefore, it was necessary to restructure the company’s organization chart with the appointment of a Chief Growth Officer and the creation of the Growth area. This new department is responsible for ensuring the coordination of initiatives, and of those responsible for innovation within the organization.
Two areas of Continuous Improvement and Data and Artificial Intelligence were created to assign innovation talent within the organization, so as to enhance the growth of the horizons: 1 – Continuous Improvement; 2 – Diverge, from an internal perspective; and 3 – Diverge/Ventures from an external perspective.
- Innovation based on observation, experimentation and data
The definition of a transversal data strategy, metrics and routines, with a team dedicated to data analytics, will enable the innovation process to be streamlined with solid and reliable insights. In an experimentation stage, these processes allow the risk and uncertainty associated to the innovation process to be reduced. It is up to the people responsible for each innovation project to ensure the use of data and metrics by the team.
Routines and moments for sharing ideas are encouraged and should come from those responsible. At the same time, the creation of an incentive system aligned with the overall growth of the organization, the business unit, and the collaborator will increase the motivation of the organization to get involved in the project.
- Open innovation ecosystem
The creation of open innovation programs allows the gathering and generation of ideas and of disruptive methodologies in partnership with external organizations. The organizations to be considered are selected depending on the stage of the research process, and their relationship with the company, through attraction campaigns or spontaneous applications. This scouting process can be triggered depending on a company’s need, as well as a specific area of focus, and foresees obtaining valuable insights, and methodologies that the company does not previously have within its reach.
- Restructuring of the innovation system
The company’s innovation processes need to be streamlined from problem identification to incubation and acceleration of ideas, so that an internal culture of innovation is created. The creation of innovation teams by initiative within the organization ensures the engagement of staff from the beginning to the end of each project.
The duration of the innovation cycles needs to be radically reduced. This adjustment will allow the time-to-market to be reduced, and more ideas to be tested in less time, thus making innovation efforts more profitable. The innovation system is redefined to meet the needs of the business:
Problem – solution fit / lab
Starting from the identification of real market problems and needs, which allows for the ideas to be developed, begins the low fidelity prototyping of what could become the company’s new product or service. In this initial stage, the goal is to develop a product with potential interest for the market and which is feasible for the company.
After a series of tests to assess the relevance and further selection of the problem to invest in, the prototype moves onto the acceleration stage. This process involves the use of KAIZEN™ and Design Thinking techniques, as well as structured and unstructured data available within the company at the time of the project’s execution.
Product – market fit / incubation
The identified prototype acts as an input for the solution development that continues to the market validation stage. This initiative, developed in an iterative and incremental way through methods such as design sprint and lean-start up, leads to the development of the product from a Minimum Viable Product solution and after confirmation of the product-market fit. Once validated, the product – solution – is launched into the market and the first sale is closed.
Growth / acceleration
After the incubation of the product and the initial sale, the project begins the sales expansion stage. After the first sales stage, and after ensuring that the product can respond to the new value proposition, it is necessary to escalate and capture the market as quickly as possible.
- Development of growth exploration programs
Considering that the organization dedicates a small part of its resources to innovation, the likelihood of all ideas moving from the ideation stage to the development stage is low. It is therefore necessary to explore as many hypotheses as possible with several teams at once.
So that the management can be updated on all the innovations in progress, as well as on all the possibilities yet to be defined, we suggest the implementation of the following table with the current state of each project. The company can easily identify the stage in which each project is at and define the next innovation efforts.
- Improvement of internal and external communication
Internally, it is necessary to ensure the quantity and quality of the information being communicated. We advise a transition from the previously used means of communication to a more dynamic format, such as videos, interviews, results and customer stories.
External communication involves getting to know the innovation forefront in the market (partner entities, competitors and start-ups). This process stimulates the company’s innovation ecosystem as well as open innovation together with entities outside the organization.
Considering the implementation horizon of each innovation, it is expected that the company will reduce innovation time to 1/3 of the current time, i.e. from 3 years to only 1 year. The Beta program should result in an added value of £2.6M/year as opposed to the current £1.3M.
As for product-market fit, it is expected that, with the implementation of the proposed improvements, after three years, it will be possible to reduce the initial product development time – from ideation to market introduction – to just one year.
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