Achieving growth through innovation

Transcription

1 Perspectives Achieving growth through innovation Moving beyond the economic turmoil of the past two years, many organisations are now looking to refocus their strategic efforts from survival to growth.

2 Innovation: The commercialisation or implementation of ideas that provides financial benefit to the organisation. One proven growth strategy is innovation. For many companies this means developing and bringing new products and services to market. For others it will mean using innovation to deliver their products or services more effi ciently or cost effectively. Many organisations, however, do not embody a culture that truly enables and supports innovation. In this paper we will look at the most important organisational aspects that stimulate innovation as a culture and strategy for growth. Recent Towers Watson data show that innovation lies at the heart of the top growth strategies for European companies 1. Amongst those cited were improved customer service, new products and services and more effi cient operations, each of which call for signifi cant innovation to be successful. To deliver signifi cant improvements to customer service, products and services or operational effi ciency, organisations need to tap into the creativity and innovation potential of their employees. Employees can often see quite clearly where and what type of innovation is needed, but they do not know how to get their ideas supported, developed and channelled through their organisation s processes. Running up against such glass walls demotivates employees and discourages them from taking the kinds of benefi cial risks that help organisations more quickly develop and commercialise new products, services and business processes. 1 Towers Watson: Recession to Recovery, Achieving growth through innovation

3 What motivates employees to innovate? Towers Watson holds one of the world s largest employee opinion databases. From this we have identifi ed that the two main cultural drivers of innovation are the quality of local supervision and the degree of local empowerment. The importance of the supervisor and empowerment can be readily observed as we view the journey an idea takes towards successful innovation. Supervision most ideas start with an individual, then progress to a small team of people. To continue towards market launch or implementation, the developing idea needs support from the organisation. For most employees the fi rst point of contact with the organisation s innovation process is through their fi rst-line supervisor or manager. The response experienced by the employee, whether positive or negative, refl ects the organisation s attitude towards innovation. Empowerment the freedom and encouragement to speak up and being given responsibility for doing a good job. A culture of empowerment and continuous improvement tells employees that innovation is part of the strategy of the organisation and that employees have an important part to play in its delivery. If employees do not feel empowered, they stop contributing their ideas and are less willing to try out new and better ways of doing things. Organisations that seek to focus on innovation to drive their future growth need to ensure that an environment that nurtures innovation takes root across all necessary levels and functions within the organisation. But all too often organisations do not know where to start in order to create the environment, processes, structures and programmes necessary for successful and sustainable growth through innovation. Case study international telecoms company Innovation is key to telecoms organisations. New products and services maintain a market that is essentially saturated. Figures show that 85% of the adults in the UK own a mobile telephone, while four out of fi ve children own one by the time they are 11. The results of our client s employee survey showed that innovation was an important factor driving engagement and consequently, the organisation s business performance. Further analysis of the data showed that while employees collaborated locally they did not feel that they could contribute larger organisational innovations or take calculated risks to innovate. Areas that were identifi ed for initiatives to improve the innovation culture were: Cultural degree of risk taking, learning from mistakes and the fear of failure. Processes how to drive innovation through the organisation, process for idea selection and development. From time to time, the business might take a more revolutionary or evolutionary approach to respond to market and economic conditions. Figure 01. Key drivers of innovation Supervision Innovation* Empowerment * As measured by the statement people in my department are encouraged to come up with innovative solutions to work related problems. Achieving growth through innovation 3

4 From our research and experience we have identified three fundamental questions that such organisations must be able to answer to assess their innovation readiness and/or the barriers they face in creating an innovation culture: 1. What does innovation mean to the organisation? 2. What is the organisation s level of innovation ambition? 3. Does the organisation have the elements required for an innovation culture? 1. Understanding what innovation means to the organisation At Towers Watson the definition of innovation we use is: the commercialisation or implementation of ideas that provides financial benefit to the organisation. There are other definitions of innovation. However, they all share the concept of taking an idea, putting it into practice and deriving a beneficial result from it. Besides having an agreed definition of innovation, organisations also need to have a clear, shared understanding of innovation within the context of their business, their markets, their customers and their industry. Whilst this might sound quite straightforward or intuitive, it is often a challenge for an organisation s leaders and senior managers to achieve alignment around such strategic issues. Many of our clients have found techniques such as Leadership Workshops or the Towers Watson Cultural Alignment Tool to be helpful in this regard. Answering this first question enables all employees to focus their innovation efforts behind a definition that aligns with the organisation s strategy. 2. Understanding the organisation s level of innovation ambition Some organisations, indeed whole industry sectors, rely on revolutionary or disruptive innovations to achieve growth and competitive advantage. Others pursue a more evolutionary approach of ongoing improvements and developments to existing products, services or processes. Where an organisation sits along the continuum influences factors such as: the level of risk-taking the company is willing to encourage or accept the criteria for selecting which ideas to support and develop (and the supporting systems, structures, processes and programmes) the scale of investment required to take an innovation to market, or implement it. Moreover, an organisation s position on the continuum does not necessarily remain static. From time to time, the business might take a more revolutionary or evolutionary approach to respond to market and economic conditions. Understanding this aspect to innovation culture, and seeking to build in this flexibility, is essential in helping companies address the last of our three key questions. Figure 02. The innovation ambition continuum Evolutionary Incremental improvements to products/services, processes, business model Revolutionary Radical/disruptive advances to products/services, processes, business model Achieving growth through innovation 4

5 3. Does the organisation have the elements required for an innovation culture? Towers Watson s model of innovation culture consists of six areas that our research shows to be crucial: Organisation How does the organisation support innovation through its leaders, managers, operational procedures, recognition and reward schemes, and so on? Environment Is the working environment conducive to innovative thinking and challenge? Are there, for example, shared spaces or opportunities for brain-storming and idea creation? Business/market How does your innovation culture need to be adapted to respond to the market in which you operate? Is it highly competitive? Is it commoditised? Is it subject to disruptive technologies or business models? Is the market mature, emerging, shrinking, growing, expanding and so on? Metrics How does the organisation measure successful innovation? How does it measure the cost of innovation (or of not innovating)? Customer Whether customers are internal or external, what does the organisation do to understand the wants and needs of its customers? Is its innovation strategy built around product or service-push or market-pull? Process What mechanisms does the organisation have to support and develop ideas and to commercialise or implement them? How are resources allocated and tracked? How are ideas evaluated for support? Truly innovative organisations have developed a clear understanding of how they operate in each of these six areas. They have also put in place the communications and mechanisms needed by individuals and teams to be successful innovators. Figure 03. Towers Watson s model of innovation culture Process Idea generation (create) Assessment (select/adopt) Development Launch Budget Time Manage external innovation Organisation Management Innovation history Innovation ambition Reward and recognition Multi-disciplinary team Organisational Social/Team Customer Insight Needs Segmentation Adventurousness Individual Environment Shared spaces Creativity tools Physical space Creative colours Resource availability Metrics ROI Innovation time/budget Engagement Reward and recognition Business/market Competitors Barriers to entry Technology advances Achieving growth through innovation 5

6 Building a culture that better supports innovation Towers Watson s innovation survey The right culture is essential for successful innovation. The best innovation strategy can fail if the culture acts as a barrier. Do employees feel empowered to develop ideas? Will they be supported by the immediate manager? What will be the criteria for selecting ideas for development? Towers Watson believes the best way to measure how ready your organisation, culture and support processes are to support innovation is to ask the opinion of those people best placed to know and to give honest feedback: your employees. To help companies identify, understand and overcome the cultural barriers to success, we have developed an innovation survey. The extensive question set assesses the readiness of an organisation to innovate, looking at each area of the culture model and providing the organisation with actionable insights that show where interventions are required to achieve a culture that will support a successful growth through innovation strategy. The Towers Watson innovation culture survey 1 Builds commitment to an agreed and articulated defi nition of innovation. 2 Identifi es the strengths and weakness that impact the organisation s ability to deliver its innovation ambition. 3 Develops systems, processes and cultural interventions that release the innovation potential of the organisation and its employees. 4 Provides benchmarks against Towers Watson norms for: High performance companies Innovative companies Figure 04. A sample of the categories and questions available to develop an innovation culture survey Category Focus Example questions Empowerment Supervisor/ Line management Risk tolerance Teamwork Does the organisation empower employees to innovate? Do employees have the freedom to innovate? Do line managers encourage and support innovation? Or are they seen as a barrier to innovation? Does the organisation have the appropriate level of risk tolerance for its innovation ambition? Is the organisation s structure set up to encourage teamwork for innovation? Is there a learning environment? In my department, we have authority to change the way work is done in order to improve the performance of the business. This company operates on the principle that ideas to improve the business can come from anywhere. My immediate manager encourages and empowers people to take initiative in their work. My manager removes barriers to our implementing new ideas. This company has established a climate where one can challenge our traditional ways of doing things. When implementing new ideas this organisation is willing to take prudent risks. In my department, we collaborate to come up with innovative solutions. This organisation brings together cross-functional teams to tackle specifi c problems. 6 Achieving growth through innovation

7 Summary Innovation as a strategy for growth has become more important as a result of the fi nancial crisis. For companies to re-engage customers they need to bring new products and services to the market and to deliver them more effectively. But many organisations are not in a position to benefi t from the strategy as they do not understand the cultural barriers or see the glass walls that block the identifi cation, development and commercialisation of ideas. Using our unrivalled experience of working with organisations to realise the benefi ts from their employee survey data we are able to develop the insights and actions needed to help organisations develop their culture and remove the barriers to innovation. Towers Watson is a leading global professional services company that has been delivering expertise in the fi eld of employee surveys for 35 years. Our practice was further bolstered in March 2007 through the acquisition of International Survey Research (ISR). We now maintain the world s largest database of employee opinion norms by country, industry and job level, as well as global high-performing companies. Further information For more information please contact Julie Brophy julie.brophy@ 7 Achieving growth through innovation

8 About Towers Watson Towers Watson is a leading global professional services company that helps organisations improve performance through effective people, risk and financial management. With 14,000 associates around the world, we offer solutions in the areas of employee benefits, talent management, rewards, and risk and capital management. Towers Watson is represented in the UK by Towers Watson Limited, Towers Watson UK Limited and Towers Watson Capital Markets Limited. The information in this publication is of general interest and guidance. Action should not be taken on the basis of any article without seeking specific advice. To unsubscribe, eu.unsubscribe@ with the publication name as the subject and include your name, title and company address. Copyright 2011 Towers Watson. All rights reserved. TW-EU April 2011.