What is innovation governance

Updated: Sep 17 2012, 09:25am hrs
Jean-Philippe Deschamps

Managing innovation effectively involves mastering a number of processesfrom idea generation to project management and commercialisationacross functions, disciplines, or even companies. At the same time, it requires promoting a culture that channels creativity, stimulates entrepreneurship and encourages teamwork. The role of top management is to combine hard business processes and soft people factors through an effective innovation governance system. Innovation governance is not a task that can be delegated to any single functioninnovation is inherently cross-functionalnor is it one that can be delegated to the lower levels of the organisation.

Innovation governance provides a frame that defines the mission, focus and implementation of innovation in the company. It starts with establishing a set of policies regarding the scope of innovation and addressing a number of questions dealing with both content (i.e. projects) and process (i.e. approaches and responsibilities).

In many companies, management behaves as if innovation dealt only with the development of new technologies and products. It ignores or at least underestimates the importance of other types of innovations. Therefore, innovation governance must fight this misapprehension and promote and steer all aspects of innovation. Defining innovation broadly means at least three things for senior managers: enriching projects through multiple innovations; paying attention to all the specific processes within innovation; and combining top-down and bottom-up innovation.

As part of its governance mission, management must ensure that their company innovates across all aspects, not just in technologies and products. More importantly, they need to remind the organisation that sustainable advantages often come from combined, mutually-reinforcing innovations. It is important to establish a process whereby project teams are required to think through and propose innovations in all aspects of their product, including business model, process, offering and delivery.

Thinking broadly about innovation means going beyond the traditional focus on new product development projects. Innovation governance execute effectively all the critical, albeit fuzzy, upstream processesstarting with an immersion in the market, the identification of opportunities and the generation of ideas to exploit them. It implies also to focus the organisation on the disciplined downstream processes that conditions success in the market by way of the product launch, roll-out and customer integration.

Some companies, particularly in the US, are known as archetypical bottom-up innovators, meaning they rely heavily on the creativity, imagination and entrepreneurship of their staff. Others, particularly in Asia, favour ambition-driven, top-down innovation. In these companies, leaders search for and target opportunities, then align the organisation to implement them. Both innovation modes are essential and it is the role of top management, as part of its innovation governance mission, to find the right balance between bottom-up and top-down innovation. A comprehensive innovation governance system needs to address at least six fundamental questions:

Why do you want to innovate

Senior managers may well think that the answer is so obvious that this question is unnecessary, but it needs to be asked; does everyone in your organisation think that the answer is obvious Do all employees know why you need to innovate, and how this imperative relates to your corporate vision and objectives The actual answer will vary according to circumstancesfor example, companies in a strategic stalemate may look at innovation as a way to generate totally new business, while others may see it as a way to reinforce their current businessbut clarifying it is important. It helps iron out differences in perception and communicates clearly with the rest of the organisation. Answering this first question will, in fact, be the starting point of your innovation governance mission.

Where do you look for innovation

Defining the purpose and objective of innovation leads naturally to the next question: where should you focus and what should be your priorities What type of innovation do you want to pursue and for what objective Some organisations argue that innovation is needed in all business areas, and as such they promote a wide scope for their innovation activities. Others are more focused in their search for competitive advantage. Generally, innovation is most effective when it is tightly aligned with the priorities identified in the business strategy.

How much innovation you target

This question covers two different areas: ambition and risk, and funding. The first will help you define how much risk you are willing to take to achieve the innovation that you want. In other words, are you willing to accept a high level of uncertainty in the search for breakthroughs, or do you favour a more prudent approach in the form of a series of incremental improvements Clarity on this will ensure that employees fully understand the risk/reward boundaries in their search for new ideas. The second aspectfundingis just as important. There is little point in pursuing breakthrough ideas unless you can commit the resources necessary to implement them fully and market them aggressively.

How can you innovate effectively

The number of books, articles and public seminars devoted to this question shows that it is on the agenda of nearly all organisations, including the most innovative. A good innovation governance system will always include a formal process to assess the effectiveness of all innovation activities (processes, tools and measures). But it will also identify opportunities for improvements in softer organisational and cultural aspects, such as communications, cooperation and teamwork as well as entrepreneurship and risk taking.

With whom should you innovate

Open-source innovationbuilding on the ideas and technology of external partnersis now pervading most businesses. Innovation governance includes the formulation of a policy regarding the extent and scope of future cooperation and partnerships, as well as the necessary incentives to making it happen in practice.

Who should be responsible for what in innovation

One of the most concrete aspects of innovation governance is the definition and allocation of specific management responsibilities at all levels. From the highest leveli.e. who is in overall charge of innovation in our companyto more operational levelsi.e. who will be in charge of specific processes or missions Top management can choose between different models for the assignment of primary and supporting responsibilities, each with their advantages and disadvantages.

Jean-Philippe Deschamps is Professor of Technology & Innovation Management at IMD Business School, Switzerland