Innovation is an essential component of any business that strives to be successful. For an innovation to prosper, it requires a good strategy, leadership, investment and incorporating the right management process. Following a streamlined innovation management process should be a priority for most organizations that want to make a difference and initiate innovation.
This article will walk you through everything you need in order to understand the essence of innovation management, the different model types that exist, which are the ways to assess organizational capabilities and why it is important. Moreover, when companies strive for innovation management success, they should also keep in mind what are the key innovation drivers and the best strategies for managing innovations in today’s fast paced world.
Understanding innovation management
There are some arguments around managing innovation in general. What stands behind it is the idea that innovations can’t be managed, or aren’t supposed to be limited or controlled in such a sense. Other people argue that in order for an innovation to flourish, make a difference and be useful, it should be properly managed. These people believe that building innovation management systems and business processes for the purpose of creating more innovation is the key to any business that wants to improve and stay on the market as long as possible.
The definition of innovation management looks like this: “Innovation management refers to handling of all the activities needed to “introduce something new”, which in practice means things like coming up with ideas, developing, prioritizing and implementing them, as well as putting them into practice, for example by launching new products, or by introducing new internal processes.” (1) This definition, as simply put as possible, can make us understand the idea behind managing innovation and its purpose.
Which are the four key components of innovation management? Capabilities, structures, culture, and strategy. Capabilities refer to the organization’s resources, including the practical skills, knowledge, and creativity of its people, including the financial and informational assets. These capabilities form the foundation for creating and managing innovation.
Structures serve as the enablers that maximize the use of capabilities. Organizational structures, and processes allow ideas to flow efficiently, creating faster decision-making and implementation processes. A culture that encourages creativity, learning, and experimentation and embraces failure as part of the sustainable innovation process is what a pro-innovation one is like. Meanwhile, a business strategy provides a guiding framework for innovation activities, and aligns them with long-term organizational objectives.
There are a few vital steps to take in order to further understand innovation management and to implement it in an effective way:
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- Step 1 – Generating topics and ideas: The first step involves turning a working space into an innovative ecosystem that encourages employees to think creatively, work on projects they are passionate about and find meaningful. Sharing ideas and working cooperatively with other employees in the company will make sure that a lot of different outside the box ideas are generated. Understanding user needs, coming up with possible solutions, and prototyping to address real-world challenges are other key aspects of the process of generating and evaluating possible ideas.
- Step 2 – Recording and screening: After coming up with all sorts of different ideas and topics in a company, there should be an efficient method for recording them and making them publicly available. It could be both a shared document in a platform, or a reporting meeting of the
staff once a month. During those meetings, a screening and an in-depth analysis of the generated ideas and strategies should also exist in order to make better future decisions. - Step 3 – Developing a solution: The next step after evaluating the risks and the benefits in the second steps, is to develop a strategic approach done with real-world market tests. This is done to gather insights and feedback of the customer satisfaction ratings. The whole idea behind this well managed innovation process is to maximize the innovations impact and longevity on the market.
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- Step 4 – Marketing: This step focuses on the real-world impact the innovation has on the customers and the market overall. It involved the implementation of the innovation, the product, service or anything that is created, making it available for potential consumers through mass production. Marketing plays a central role in the engagement and awareness with the product or the service and it establishes the innovation’s presence. Its end goal is to generate value and trust towards it.
- Step 5 – Integrating and implementing ideas: In this last step companies choose in which idea to invest their resources and efforts and which is the innovation that is closest to the markets and customers needs. The key question here is to what extent does the innovation engage with the target audience. The successful implementation includes translating the innovative idea into real-world applications. It focuses on the practical aspects of the created innovation and assessing the impact of the innovation on customer needs.
To sum up the definition of the process and the steps, achieving innovation management success involves systematically generating, evaluating, and implementing new ideas to drive business success. The focus is put mainly on real-world application and customer impact.
Types of innovation management models
Different innovative initiatives fall into a few types of management models according to the projects, the strategies they choose, or the overall company innovative culture they apply.
Open innovation model
The open innovation model is an approach that uses the philosophy for an open mind to externally generated ideas. Those ingenious ideas can be generated outside the company, but if they are suitable, they can still be applied and implemented. This model is opposite to the closed method, which only focuses on ideas generated inside the company and by the company’s employees.
In the open model the focus is put on collaboration between other external business partners in other industries. This could enhance the strategic growth of the company. The larger flow of ideas and perspectives and the new experts to evaluate ideas and concepts can all be considered benefits of this model. What’s really key here is the balance between the internal employee output and the engagement and input of other companies and experts.
Incremental innovation
The incremental innovation strategy relies on constant and steady state process improvements over a large amount of time. It provides a lower barrier to change and looks mostly to already existing resources and tools as potential ways to improve business opportunities. It requires less risk-taking and less capital since it is way easier to predict and it allows more control in case of any disruptions. This is a common choice of any business starters since it is a process of continuously improving or changing a business’s existing products and services.
Companies that practice this method can offer their products and services on a regular basis with smaller changes, as it seems more reliable and sustainable. For example, a computer company will focus on creating an improved computer model each year instead of constantly coming up with brand new ideas for products. These innovations can slowly grow the business and tempt repeat buyers.
Sustaining innovation model
Sustaining innovation centres around gradually improving a product, service, or process. This method seeks the most sustainable strategy to manage their innovations and develop ideas. It looks for ways to improve current processes and avoid investing resources in inventing new ways.
This is a very suitable approach for innovation managers who have an in-depth knowledge of their market and know what their customers’ problems are. They can easily come up with proper innovative solutions and the main question would be how to do it in the most efficient way. It has some similarities with the incremental innovation method.
Disruptive innovation
The disruptive model is usually associated with companies that disrupted the market and created new markets with brand new consumer demands which previously weren’t addressed. These are usually companies that might challenge consumers to understand and embrace the innovation the company decided that wants to create for the market.
While they can have huge benefits, it’s the most challenging to accomplish compared to other kinds of innovation. Some examples for disruptive innovation could be the rise of the touchscreen smartphone and the rise of the hybrid car when gas-powered cars were the primary option. They require managers with high tolerance to risk taking and the ability to balance between investments in innovations and maintaining current operations that are proven to bring revenue and profit to the company.
Radical innovation
The radical innovation is very similar to the previous one, the disruptive model, but it goes one step further – it creates entirely new industries and consumer habits and needs. It is a very high risk model since it is business done backwards – companies create a product for a need no one knew they had previously. These are the kind of innovations that create solutions to problems customers never thought existed in their lives.
Managers and leaders who work in this model should be high risk takers with huge visions and the ability to manage different departments. These radical innovations have the opportunity to completely change people’s lives or routines. Facebook is a good example for pioneering digital communication channels and completely changing the way people view social media.
Choosing a suitable model or method for a certain type of company, project ideas, employees and managers is crucial in maintaining a successful business that can embrace innovation management strategies.
Assessing organizational capabilities
One of the first key steps for any organization is to assess their internal capabilities. This involves evaluating current resource allocations and business models, which we already mentioned in the article. Another key aspect are key performance indicators (KPIs) to identify strengths and areas for improvement. These indicators are commonly used to measure how effective innovation activities are.
In order to measure a subjective word such as innovation, there are two simple approaches to do so known as input metrics and output metrics. (1) The input metrics could be the total number of new ideas submitted by the company’s employees for a certain period of time. Simply put, it’s measuring the activities a company does and the resources it puts into an internal innovation. It allows us to see whether the company is going in the right direction. It doesn’t guarantee an output.
The output metrics measure the results of the activities and the efforts done by the company. They could be either the number of new products launched in the last 12 months or the profit from products launched in the last 2 years. This is a great way to check whether your business innovation aligns with its initial idea and whether it gives any profit or real-world results.
Other 2 examples of KPIs that could be used are effectiveness and efficiency metrics. (2) Effectiveness metrics serve as a way to tell how effective are the team of a certain organization or company in achieving their set goals. They include overall sales from new products. Efficiency metrics help managers understand if the innovation program is doing things the right way. They give insights on progress and productivity. Examples include the number of projects that have moved from testing to production and implementation.
Identifying key innovation drivers
Directing innovation efforts effectively and making sure they complement organizational objectives and market demands require the identification of important rapid innovation drivers. These motivators frequently consist of elements like competitive pressures, evolving customer tastes, and technology breakthrough innovations.
Technological advancements
In the healthcare industry advancements in telemedicine and wearable health technologies are revolutionizing patient care and taking it to the next level. Companies such as Apple and Fitbit created wearable technology that tracks important health indicators. This allows early medical issue identification and real-time health tracking. Similar to this, developments in artificial intelligence (AI) made it possible for industries like retail and logistics to customize customer experiences and improve supply chains.
Customer demands
Customer feedback often shows which are the unmet needs that drive innovation. Tesla responded to increasing consumer demand for sustainable transportation and created a successful line of electric vehicles. This is a good example for a radical innovation model as we already mentioned previously in the article. It focuses on environmental responsibility and cutting-edge technology which not only addressed customer needs but also positioned Tesla as an industry leader in clean energy solutions.
Competitive pressures
An example for competitive pressures is the Apple company. Apple’s continuous evolution of the iPhone introduces new features, such as advanced camera technology and enhanced security measures to outpace competitors and be the top leader in the smartphone market. These innovations are designed to attract and retain customers in a crowded tech market.
Regulatory changes
External forces like new regulations can also act as innovation drivers. For instance, the European Union’s GDPR prompted organizations to develop innovative ideas into data management solutions. Companies like Microsoft introduced enhanced cloud services with built-in compliance tools, ensuring adherence to data protection laws while maintaining customer trust.
Global trends
The growing focus on sustainability as broader societal shifts has driven innovation across different industries. For example, IKEA has launched initiatives to use 100% renewable and recyclable materials in its products, which aligns with the global trend toward eco-friendly practices. This commitment has strengthened the brand’s reputation and appealed to environmentally conscious consumers.
After identifying and leveraging the key drivers, many organizations can proactively manage innovation activities, so they can remain relevant and competitive in their chosen markets.
Best practices in innovation management
This article already tackles what stands behind innovation management, which are the new business models, and how to assess organizational capabilities and key innovation drivers. It’s essential to point out the practices that are already proven to be effective in different areas and organizations.
Here is a list with a few of the strategies for an effective innovation management plan:
Defining innovation objectives
A good starting point for defining innovation objectives is setting them according to the organization’s strategic goals. In order to do so, the strategic goals should be clearly defined, and a precise innovation unit should guide the company’s goals, priorities, and align efforts with the organization’s vision. After making sure the objectives and the strategy are aligned, companies should address both short-term organizational needs and long-term future growth goals.
There should be targeted focus areas, such as improving customer satisfaction through product innovation or enhancing internal processes for efficiency. What’s important is not only to choose the specific innovation objectives, but also to choose a method for measuring innovation and analysing the outcomes. The objectives are supposed to be specific, measurable, and to show the evaluation of success of the innovation activities.
Developing innovation strategies
The innovation process is all about a growth mindset and staying outside of the box, creating something the market and the customers not only don’t expect, but also have no ideas that they need. A central role of innovation strategies is to be a bridge between ideas and execution and transform them into actionable plans.
A company with a good strategy is one that can prioritize projects based on their impact and feasibility, and use a balanced approach to manage multiple innovation initiatives. In order to do so a good strategy also suggests deploying resources such as staff talent, time, and finances encouraging innovation efforts.
Innovation processes are useful and effective if they enable long-term innovation success rather than one-time outcomes. This means that the strategy is not only successful, but also sustainable and addresses both current market needs and future trends. An additional tool that could be used as a strategy are methods like the lean startup and rapid prototyping to contribute ideas and bring them to market efficiently.
Fostering cross-functional collaboration
Innovation, creativity and collaboration go hand in hand. One of the vital priorities for an organization is to create a culture that encourages open communication and teamwork, and also gives the chance for free brainstorming meetings. Using one tool or platform that is easy to comprehend among innovation teams will make sharing information a problem-free process.
The value of collaboration across departments in order to bring varied insights and expertise to innovation projects should also be pointed out by the leaders in the company. Another thing is forming innovation collaborative technology teams with members from different areas of the organization to ensure a holistic approach to problem-solving.
What also stands behind a good decision-making process is incorporating insights from multiple functions and parts of the organization. This could also eliminate barriers between different departments and improve the flow of ideas, but also create an integrated approach to innovation management. Last, but not least aligning teams under common goals to ensure cohesive efforts and greater success in innovation initiatives is another possible approach.
Prototyping and testing innovations
Creating prototypes helps testing and refining ideas before full-scale implementation. The process includes using a cycle of design thinking, testing, feedback, and improvement to optimize solutions. The real-world testing includes evaluating prototypes in practical scenarios to gather actionable insights and identify potential challenges in certain situations.
Risk minimization is the idea that stands behind testing it before implementation. If the ideas are validated early in the development process, this reduces the risks associated with the execution of innovation. What’s best to do is involve customers or users in the testing phase to ensure the solution meets their needs and expectations. Incorporating feedback from testing to make necessary adjustments and improve the prototype makes sure that the company listens to the feedback, not only collects it.
A few examples that use prototyping and testing innovations are Tesla and IKEA. Tesla uses iterative prototyping and real-world testing for its autonomous driving features. The company collects data from customer vehicles to refine and improve the software. Before launching its Augmented Reality app, IKEA created prototypes to allow customers to visualize furniture in their homes. The iterative testing process ensured the app meets customer expectations and functioned effectively before being widely released.
Commercializing successful innovations
The key starting point when we talk about commercializing successful innovation management is the organization’s or the product’s market readiness. This includes preparing innovations to not only meet market needs but also to ensure they are viable for large-scale production or deployment. Strategic marketing is another central element to build awareness, generate demand, and position the innovation effectively in the market.
Commercializing also involves scalability, which means the innovation can be scaled up efficiently to meet anticipated demand. The focus should be on customer engagement and education to facilitate the adoption of the new product or service on the customer market and according to their needs. Moreover, commercialization efforts should be aligned with financial goals to ensure profitability.
An example for commercializing successful innovations is Apple’s commercialization of the iPhone in 2007, which revolutionized the smartphone market. The company combined innovative thinking and technology (a touchscreen interface and app ecosystem) with a strategic marketing campaign emphasizing usability and lifestyle integration. Apple ensured scalability through mass production, partnered with telecommunications companies to enhance accessibility, and continuously gathered user feedback to improve subsequent models.
The list of best practices includes some of the most important cornerstone points when creating and implementing a successful strategic innovation management plan.
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Conclusion
Innovation is not only essential for business growth but also a dynamic force that continues to evolve with time. Businesses that use the innovation management approach are able to utilize new technologies in a better way and adjust to shifting market conditions. They can also develop solutions that meet client expectations, all of which contribute to long-term success and sustainability.
Organizations can turn creative concepts into meaningful realities by establishing a collaborative environment, setting specific goals, and utilizing strategic resources. Furthermore, coordinating innovation initiatives with more comprehensive business plans guarantees that innovation not only boosts profitability but also adds value for stakeholders over time. Innovation management will be essential in the future as it enables organizations to navigate rapid technological advancements, evolving market demands, and global challenges while driving sustainable growth and competitive advantage.
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Nikol is a Technical Copywriter with a strong interest in healthcare development and medical technology. She combines her passion for these fields with her writing skills to create precise and impactful content that resonates with both professionals and consumers.
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