In our previous blog posts, we've emphasized time and time again how innovation should be the current top priority for every large corporation. But given the massive size and rigid structures of these companies, they aren’t exactly bursting at the seams with creativity. Procedures move too slowly to inspire new discovery, and bureaucratic processes swallow innovative ideas.
Given these challenges, how can you inject creative juices into a corporation, you ask? There are now a variety of new strategies intended to help large corporations see past traditional, obsolete ways of thinking and restructure their companies in a way that promotes a constant flow of new ideas. But before you jump on the first innovation strategy you see, consider this: how do you know if a corporate innovation strategy is actually working?
Many companies tend to misinterpret revenue or ROI as the best measures for innovation. When corporate innovation is still in its early stages, however, these two metrics alone are not sufficient to evaluate the overall success of a corporate innovation strategy. In countries like China especially, where a constantly shifting market has huge variations amongst demographic groups, long-run profits for new and innovative ideas may not become evident right away.
Because of the complexity and long-term nature of innovation strategies, there are several unique factors instead that can measure innovation inside your corporation more accurately. Here are some of the top metrics you need to keep your eyes on when judging the effectiveness of a corporate innovation strategy.
The first major KPI you need to keep track of is the number of new ideas and products that are being produced out of your company. Innovation is not a new product line or technology—its effects cannot be judged simply based on the success of one or two new ideas. Rather, innovation is the production of ideas itself and the representation of a major paradigm shift in your company’s mindset. A successful corporate innovation strategy will help corporations restructure and create platforms that allow employees to produce these new ideas.
After a corporation begins to produce and apply new ideas regularly, these ideas can then be explored further and measured individually for market performance. Whether or not these ideas directly lead to profits is besides the fact. If time is wasted calculating the risk for every new project without actually trying anything new, then innovation will be stopped in its tracks by the very bureaucratic mindset it was supposed to overcome.
With both success and failure come new discovery and information. Even if the majority of these new ideas do not pan out into major successes on the market, the amount of knowledge gained from these experiments is still a sign of increased innovation. By taking high-risks outside of the usual line of operation, your corporation can expand its ground and explore new areas of the market or new solutions.
According to Eric Ries, innovation requires validated learning where progress is made by directly applying ideas to the market rather than waiting idly for every new product to be approved or advanced to another launching phase. If your company is constantly bringing new products and ideas into concrete fruition, and learning from each of these successes and failures, it is definitely moving ahead of the game in innovation.
We highlighted that corporates need to work together with startups in our previous posts—this was definitely not without basis. As another part of open innovation, corporates should naturally be reaching out into the startup ecosystem to seek out what other solutions startups have come up with. Startups can often predict what ideas will potentially be disrupting a corporate in the future, and can research and produce ideas faster than any large company can.
By utilizing the speed and know-how of these entrepreneurial hubs, corporates can then get further insight on consumers, new technology, and possible new solutions. Startups benefit at the same time by receiving funding and resources from corporates to actually carry out these ideas and see what kinds of effects they will have on the market. When measuring corporate or open innovation strategies, the number of startups that have been partnered with, acquired, or even interacted with is also a vital KPI.
Innovation also plays a big role in how quickly corporates can react to constantly changing consumer demands and produce new ideas into reality.
One of the major reasons corporates need innovation so badly is because they are getting further and further away from their customers’ needs. The traditional formulas that brought corporations to their current size may have allowed them to build a massive audience and stable business model in the past. However, in the new digital age of rapidly advancing technology, consumer needs can change faster than corporations can keep up with. Open innovation strategies, as we mentioned in our previous article, can allow corporates to become more transparent and receive direct feedback or ideas from consumers. An increase in the company’s amount of channels in direct contact with consumers or feedback coming back from customers can thus also indicate an increase in overall innovation.
An example of a foreign corporate in China getting more in touch with its consumer base and successfully innovating is KFC. Rather than insisting on sticking to the trademark fried chicken the company is known and loved for overseas, the American fast food chain decided to listen to what Chinese customers wanted and then localized their menu to offer a variety of Chinese street foods. This simple shift in focus towards what customers really want allowed KFC to shoot up sales from 20% to a whopping 70%.
Another aspect of agility that demonstrates the success of innovation is the speed of internal processes. The problem corporates face when it comes to innovation is that there are too many regulations, hierarchies, and intermediary processes for any new ideas to make it to the market or be produced fast enough to beat out competitors. One of the corporate innovation strategy solutions to this is spinning out a small team from within the corporate, and allowing them to work outside of the company in an environment like a co-working space or accelerator. By allowing these individual teams to work like independent startups in spaces that are strongly inhabited by entrepreneurs, ideas will naturally start popping from left to right. Because of the small nature of the team and low-risk model of the spinout, these new ideas can then be applied more quickly with less bureaucratic interference. If your strategy functions like the above and you notice an increase in production efficiency and speed to market, you can be assured that your corporate innovation strategy is doing something right.
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