How to Manage Innovation for Growth in Sales and Profits
Innovation is one of today’s most popular business topics. As it so happens, innovation is also an area few companies do consistently well. Most innovation discussions focus on creativity and how to find the new “big idea” for the future of your company — your “iPhone moment,” so to speak.
That is an important discussion — but it’s NOT this discussion. Here we focus on the difficult task of proactively managing constant improvements to products and services with your existing employee team while also managing your company day-to-day. This is the challenge for good middle-market companies. On the matrix of “urgent versus important,” innovation falls into the “not urgent at all but incredibly important” category. (No wonder it gets put off.)
Consider what your business currently categorizes as “urgent” and “important.” Does your company have guidelines and experienced people in place to manage sales, sales forecasting, and sales budgeting without the day-to-day involvement of executive leadership? Of course you do! How about customer service? Accounting? Manufacturing? Supply chain? Of course — these are all standards for any operating business.
Now consider this: Does your company have experienced employees who understand how to gather new ideas for improvements in products and services? Who know how to analyze and assess those ideas, and present them back to executive management for consideration? For most companies, the answer is no!
Why? Why do we manage the day-to-day tactical activities within our companies with so much energy but neglect the area that’s so strategically important to our sustained growth? It’s time to realize that managing innovation from product idea to launch is creating a method of strategically increasing your company’s sales and profits forever.
There are hundreds of books and articles on innovation, but to really create a culture of innovation within your company, there are three major points to remember:
- Innovation must be managed proactively, just like the other important areas of your company.
- Innovation culture must be inspired by managing innovation teams differently than execution oriented functions like sales & operations.
- Market intelligence is required to define the new value you will deliver to customers before new products or services can be created and brought to market.
Managing Innovation in Your Company
What makes innovation such an important element in your company’s success?
Many have tried to define innovation in the past. “Research and development is the transformation of money into knowledge,” Dr. Geoffrey C. Nicholson once said. “Innovation is a transfer of knowledge into money.”
What does Nicholson know about innovation? As a VP at 3M, he’s the guy who championed Post-it® notes. And that may be the perfect product to relate to innovation: Simple yet revolutionary, inexpensive but ubiquitous, the Post-It note was a defining product of the 20th Century, in a modest but powerful way.
But here’s the thing: 3M’s executive management did not request the Post-it note. The CEO or a single “product genius” did not have responsibility for all new product ideas. Dr. Nicholson’s team didn’t even set out to create the Post-it note, but the culture at 3M allowed them to develop an innovative idea over years. The result was that the team was able to bring the product to life while gathering support for ongoing development within the company.
3M has an innovation culture — it has guidelines that enable its team members to turn good ideas into products, while still focusing on their individual goals. In early 2015, 3M reported $30 billion in sales with $10 billion of those sales coming from products just introduced in the last five years. Now that’s an innovation culture that drives sustainable growth and profits!
But remember, innovations don’t have to be miracles. The Post-it note is a perfect example — it offers a small but significant improvement in people’s lives. Think of nurturing innovation in your business with the same philosophy: A way to use your company’s knowledge to improve the wellbeing of your customers. Though they may not be aware of them yet, your customers want you to make their life easier, and if you do, they’ll reward you for it.
Developing an Innovation Culture
With 3M’s example in mind, ask yourself: Is your organization inspired to foster innovation? Innovating in a sustainable way means having your team fully engaged with it. But, though it’s just as important as the other aspects of your business operations, innovation needs to be managed differently than sales and operations. It can’t be demanded or driven; it must be nurtured within the culture itself.
Execution-oriented management styles don’t work well with innovation teams. Innovation requires freedom of thought, the wandering of ideas, and the open consideration of bad ideas along with the good ones. Innovation teams need to be facilitated from within, not managed. And that requires developing innovation guidelines.
To develop the best ideas into products, it’s critical to collect input from all areas of your company with short, written documents following these agreed-upon innovation guidelines. Once your team understands the guidelines, all team members can contribute in the innovation process. This empowerment leads to explosive and exciting new energy, with employees using the guidelines to select and filter the best ideas out of the many based on their documented commercial potential and assessed risk.
Over time, a future product pipeline is created with forecasted sales and profits — all without bureaucratic interference, and without sacrificing your current levels of productivity.
Market Intelligence and Innovation
Market intelligence is all the information you know about your markets, competitors, and customers. The goal of market intelligence is to confirm the key areas of differentiation BEFORE you create new products or services. Given what you know about the market, will your new products or services provide added value that your customers will be willing to pay more for?
Market intelligence also empowers you to shut down less worthy ideas based on the forecasted commercial value. Killing low-value projects early in the assessment period saves real money!
Gathering market intelligence is a complex process; it isn’t just about asking people what they want next. “If I had asked people what they wanted, they would have said faster horses,” as Henry Ford famously said. Market intelligence for product decisions is not obtained by asking the customer, or for that matter the sales team, what they want next. As Henry Ford emphasized decades ago, it’s about asking the right questions with the right knowledge to the right people in your marketplace.
Again, giving your employees the inspiration and guidelines to gather this vital market intelligence before you develop a product is something most good companies just don’t do, to their own detriment.
Taken together, these steps to nurture innovation within your business require changing habits and culture for the long term. When this discipline is implemented well, it will revolutionize your company.
Over the next series of articles, we’ll explore the steps in successfully creating a culture of innovation to increase sales and profits for your company.
Manage. Apply a business decision process from ideas to launch
Inspire. Engage employees in the product decision process
Define. Plan for and measure success
Kenneth M. Boyle is the President of StederNC LLC Company Advisors located in Yardley, PA. Visit his website at www.StederNC.com.