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Innovation: Still More Art Than Science

A new, exclusive survey reveals that manufacturers are focused on creating new products and services but are not well-disciplined in the management of the innovation process itself.

By David Brousell

“Innovation has nothing to do with how many R&D dollars you have. When Apple came up with the Mac, IBM was spending at least 100 times more money on R&D. It’s not about money. It’s about the people you have, how you’re led, and how much you get it.”—Steve Jobs

Steve Jobs knew a thing or two about innovation. You might say he understood innovation intuitively. He certainly was the source of many of Apple’s most inspiring innovations.

Jobs was also one of the most visible and successful innovators of his time. His name will forever be synonymous with the Mac, the iPhone, and the iPad, all of which transformed the personal computer industry and changed the way we communicate.

But what does his example say about innovation itself? Does innovation invariably spring from the creativity of one individual or a group of individuals? Can an entire organization of people innovate? Can innovation be systematized? Should it be? Or is such an attempt doomed to failure because of the nature of innovation itself?

Most manufacturers would tell you that innovation is one of their most important activities. Without innovation, growth is stymied, the future becomes uncertain. Yet, according to the latest Manufacturing Leadership Council poll on innovation within primarily small and medium-size companies, most manufacturers approach innovation less than rigorously and sometimes with a surprising informality. Are they hoping for a Steve Jobs to emerge?

In addition to the finding that most manufacturers approach innovation in a mostly informal way, the poll, which was fielded to the Manufacturing Leadership Community in March and resulted in 71 completed responses, reveals a host of interesting contradictions between perceptions of innovation prowess and innovation execution, where innovation activities are focused today and where they will be focused in the future, and methods that companies use to measure innovation activities and reward employees.

At the strategic level, only 27 percent of the survey’s respondents indicate that innovation is their companies’ primary focus, with formal plans in place to enable them to generate ideas, convert those ideas into commercial possibilities, and successfully bring them to market. (See Chart 1: Only About One-Quarter Say Innovation is Primary Focus.) Nearly half, though, consider innovation to be at least as important as other initiatives such as operational efficiency or lean manufacturing. But there is friction evident in this attitude. Only 15 percent of respondents say their companies are doing a very good job of balancing innovation with these other, equally important activities. (See Chart 3: Much Headroom Evident in Innovation Abilities.)

But what is much clearer is the target of innovation activities. Just over 50 percent of survey respondents say that new products and services are the primary focus of their innovation efforts. (See Chart 2: New Products, Services Clear Target of Innovation Efforts.) In fact, new products and services define innovation for the majority of companies. Improvements to existing products and innovations in business processes, for example, command far less attention.

This focus becomes even more evident when poll takers were asked about the degree of emphasis their companies place on innovation in a variety of functional, or line-of-business, areas such as production, supply chain, sales and marketing, and customer engagement. Nearly half of survey respondents, 49 percent, said that their companies placed a high degree of emphasis on innovating in product design and development, the strongest finding among the functional areas. (See Chart 4: Diversity Seen in Functional Innovation Emphasis.)

Interestingly, over the next five years, though, the desire to improve customer engagement jumps up significantly in importance. Today, 37 percent of survey respondents attributed a high degree of emphasis on innovating around customer engagement, but 61 percent anticipate a strong innovation emphasis in those processes within five years, which will place it on a footing equal to product design and development. (See Chart 5: Customer Engagement Slated for Greater Emphasis.)

But the survey results suggest manufacturers may encounter challenges ratcheting up their emphasis on customer engagement innovation. That’s because the results indicate a shortfall in companies’ ability to manage innovation, a discipline that appears to be in need of much innovation itself. Only 28 percent of survey respondents, for example, rate their companies’ ability to convert a new idea to a product or service highly, although nearly 60 percent say they have a respectable capability in this area. (See Chart 3: Much Headroom Evident in Innovation Abilities.)

charts-1-5.gifNearly half of survey respondents also hold the perception that their companies focus their time, money, and people resources on the ideas that will best move their businesses forward, but only 23 percent say their companies have a systematic method or pipeline to centrally store and keep track of innovation ideas. That’s the same low percentage who said they have an objective evaluation system to kill bad ideas and projects. Most tellingly, only 17 percent say that their companies have an innovation process in place with clearly defined roles, responsibilities, and deliverables for stakeholders. (See Chart 6: Systematic Approach to Innovation Management Not Widespread.)

The same sort of contradictory scenario played out when survey respondents were asked about how their companies generate ideas. A majority of survey takers said that customer insights and unmet needs drive their innovation efforts, but only 13 percent use market research to identify and validate those needs, and even fewer, 10 percent, use any kind of anthropological, ethnographic, social media, or customer research to discover those needs. (See Chart 7: Customers Drive Idea Generation, But Approach is Informal.)

The reason for this may come back to the example of Mr. Jobs. Seventy percent of survey respondents said that top management, including the president or CEO, is most responsible for innovation strategy. Only a small fraction of respondents identify a chief innovation officer or an innovation center of excellence in that strategic role. Interestingly, 11 percent said that “everyone” is responsible for innovation strategy in their companies, a finding that may suggest a diffusion of responsibility or even a lack of leadership, one of Steve Jobs’s key points. Even more troubling are the findings that 79 percent of survey respondents said that their companies do not provide a specific amount of time for people to devote to innovation activities, and 66 percent said they do not have quantitative metrics in place to measure the innovation process. (See Chart 10: Most Do Not Have Innovation Metrics.)

On the positive side of the ledger, though, a strong majority of poll respondents indicate they are involved in some type of collaborative innovation arrangement. When asked if they partner with outside companies and organizations in order to innovate, 69 percent answered in the affirmative, while 28 percent said they did not.

And what’s the wellspring of new ideas? Nearly one-third of survey respondents said it boils down to a few individuals. Leadership teams, at 23 percent, also figure prominently.

But the generation of ideas, respondents said, is not the most significant innovation challenge they face. Sixty percent said that up to 20 percent of all innovation ideas result in a new product, service, or internal process improvement. But a lack of financial resources to translate ideas to successful new products or services, cited by 37 percent, is the biggest stumbling block to expanding successful innovation for this group. (See Chart 8: Financial Resources is Most Significant Challenge.)

charts-6-10.gifGiven all the issues around the management of the innovation process and the problem of resource constraints, what can be said of the future state of innovation in manufacturing? The good news is that companies seem to "get” the nature of the beast, as Jobs might say, and are prepared to let it behave naturally. Sixty-six percent of respondents said, for example, that their companies have created a nonthreatening environment for experimentation and discovery. And an even larger percentage, 75 percent, said that their companies recognize that failure is a key and even necessary element of the innovation process. And nearly half, 48 percent, are providing direct financial rewards to those who innovate.

In this environment, innovation may proceed not only as it always has but as it was meant to do. Nevertheless, one can’t help wonder whether the application of greater management rigor to the process could accelerate and expand innovation in many companies. The challenge for leaders moving forward may very well be in finding an appropriate balance between the art and the science of innovation.

brousell.gifDavid Brousell is Global Vice President, Research, and Editorial Director, Manufacturing Leadership Council