A common mistake in industries faced by severe performance pressure is to turn to well-known innovation tools and strategies. Especially in sectors where innovation is not at the core of the business, a new approach is required. A proven method has entered the race – so far, with impressive results.
It is undisputed that innovation is a key driver of corporate growth and performance. It is equally widely accepted that installing and maintaining an innovation capability is a non-trivial, organisation-wide endeavour. However, what tends to be overlooked is that not all organisations can – or should – innovate using the same tools. Instead, for innovation to generate the necessary business outcomes and organisational benefits for the long term, a different type of path should be explored.
First stop: In-house innovation
A wealth of innovation strategies and instruments is meanwhile available to organisations. Although it makes sense to absorb the know-how previously put to test by others, those facing pressure to innovate often fail to be innovative in their methods. These usually include hiring senior experts from tech-giants, expecting them to inspire staff and managers alike and push the culture towards a more exploratory one. They also include newly established innovation teams reporting directly to a C-level executive in order to showcase the strategic importance of innovation for the company. Particularly committed organisations introduce a Chief Innovation Officer to drive and oversee innovation activities. As these efforts take time, organisations feel under pressure to showcase their innovation credibility to the outside. As a result, we see a plethora of apps being launched, partnerships with start-ups announced and innovation prizes awarded.
Second stop: Externalised innovation
For organisations not used to innovation being part of their development, decision-making and performance structures, in-house innovation is extremely difficult to operationalise and often fails. The innovation teams rapidly find themselves isolated as they don´t fit into the established system, while being considered an expensive burden on the business. A few years back, we have seen several major corporations open impressive innovation labs in Silicon Valley to complement or replace their in-house innovation efforts. These labs (again) gathered staff from tech-giants and in some cases also respective industry experts to ensure compliance and interoperability with existing corporate structures. Being a lot more difficult to supervise and keep in touch with than in-house innovation teams, only few of the innovation labs were connected to the core business and were able to drive major change.
Why innovate yourself?
It has been said many times before: long-established companies are known to be proficient when it comes to optimising their core offering but perform poorly as regards game-changing approaches. Especially in industries where transformative change isn´t continuously required, businesses should refrain from transforming themselves too fast. In fact, even when game-changing ideas are sought for, these are unlikely to originate in-house or in a corporate innovation lab. Luckily, there is a better way, and it is not even new. It is called procurement.
Organisations already effectively delegate (or outsource) parts of their business to specialists to either better face volatility in demand, reduce costs or streamline their operational footprint. In sum, they procure activities that are not considered core to their business – a global industry worth estimated USD 2.8bn in 2018 and growing with double-digits. Importantly, innovative solutions can be and are already being sourced, negotiated and purchased successfully just as any other part of the business. After all, procuring for innovation means no more than hiring the best available provider for a challenging assignment in a structured and strictly performance-oriented manner.
Very few business leaders are aware of the fact that innovation procurement has been practiced by the public sector for over a decade already. Launched by progressively thinking EU agencies, it has enabled hospitals, cities and other stakeholders to procure innovative solutions with impressive results. Assignments are being given to both young and mature businesses capable of delivering a solution to the procured challenge, while being managed according to strict schedules and performance milestones typical for the procurement sector. This helps not only the leading organisation but disciplines the innovation suppliers more than investors ever could.
For particularly complex challenges where ideas may not yet be market-ready, so-called “pre-commercial innovation procurement” has been performing well in Europe for years. From self-driving hospital beds to high-end supercomputers, ideas are being refined and put to work in a structured partnership between assigning bodies and innovators. We now have a wealth of proof demonstrating that innovation procurement works and that what started as a demand-driven public effort to make Europe more competitive is ready to be put to test by corporations.
Innovation as a service
Expecting in-house innovation teams to deliver breakthrough ideas for all business and operations challenges is both naïve and irresponsible. Unfortunately, a widespread misconception across industries facing performance pressure remains that innovation must become a part of their core skill set. If retained, this misleading perspective will prevent them from experiencing just how effectively innovative ideas can be purchased and tailored – a lesson that the aforementioned public organisations in Europe have learnt over a decade ago.
Overall, letting go of the innovation frenzy is as important as accepting that innovative solutions can be managed just like any other business task – with a strict timeline, no disruption to core operations and clear responsibilities on both sides. The ultimate insight is: if innovation is not at the core of your business model, there is no reason to treat it as if it were.
About the Author
Claudio Cisullo is a Swiss-based serial entrepreneur and investor. He is the founder and Chairman of CC Trust, a family office invested across the biotech, leisure, pharmaceuticals, professional services, real estate and technology sectors. Among his most recent investment is Chain IQ Group, a globally active provider of procurement services.