Innovation Governance is a system of cross-functional decision-making processes that define, align and manage innovation activities across the entire product lifecycle.
Effective innovation governance ensures the achievement of strategic growth goals. It encompasses business decisions that impact every phase of the product lifecycle and affect many parts of the organisation. Product innovation is crucial for sustainable growth. There is a strong correlation between successful innovation and business success. Overall, research has become a core component of corporate strategy, anchored in long-running development cycles and contracts with customers and suppliers.
“Innovative companies typically generate superior returns for shareholders: a premium of 12.4 percent compared with industry peers over a 3-year period” .BCG with Business Week
Spending Smarter to Improve Business Impact
CEO’s have become more cautious about their spending while seeking to increase the impact on their business. Some examples of smarter spending are:
- Shifting resources away from basic research to prioritise product launches
- Making innovation processes more efficient
- Killing weaker products earlier in the lifecycle
- Tightening up on risk-related criteria when making green light decisions
- Developing affordable, new products and simplifying programs
- Measuring R&D productivity
To achieve strategic innovation and performance goals of their organisation, senior executives and managers need to define, design and manage innovation activities that is: Innovation Governance.
Innovation Governance seeks to improve the effectiveness and the efficiency of business process such as:
- Strategic Planning and Roadmapping
- Ideation and intellectual property development
- Concept and product development
- Risk assessment and gated process execution
- Product portfolio management
- Resource planning (Please go to our Resources page to read more about all the topics above)
Bridging the Gap
The distance between leader aspirations and the execution of innovation efforts cannot be bridged by process improvement alone. It requires cultural and behavioural changes to improve innovation performance. Top management also need to:
- Embrace innovation, integrating it into their strategic agenda and setting themselves up as role models.
- Create and encourage networks of innovators, to be facilitated by selected innovation leaders
- Foster a readiness to experiment to allow for failure which the organisation can learn from in order to give as many employees as possible, a positive experience in pursuing innovation.
Product Portfolio Challenges
The problems confronting businesses in product innovation have been well documented and leading innovation expert Dr Robert Cooper’s research has shown that 46% of product development resources are spent on products that fail commercially or never make it to market. Furthermore, of those products that are launch % fail. 2.
In particular, the difference between best practice and average companies is the level of effort invested in assessing ideas before are advanced to development.
Some examples of investment activities are:
- Ensuring ideas are aligned with strategy
- Initial screening and evaluation of ideas
- Evaluating ideas in focus groups and expert forums
- Carrying out preliminary market and technical assessments (validation of actual market needs)
- Preliminary businesses and financial assessments, and:
- Creating clear product definitions
Product Portfolio Management
The product portfolio is situated at the heart of innovation governance, between strategy and execution. It represents both strategies (how much investment do we intend to make in the various strategic areas?) and product development projects currently being executed. Thus, one of the principal functions of product portfolio management is to ascertain whether execution is aligned to strategy.
Best Practice Portfolio Reports
Innovation governance solutions should offer an appropriate set of reports that reflect best practice product portfolio assessment requirements.
- Pipeline reports should show the status of all projects
- Portfolio analysis should show whether projects that are aligned with strategy deliver sufficient value and are a balance of short and long term, large and small and incremental breakout innovation.
- Process performance charts should show whether there is sufficient volume of ideas, whether concepts and projects in each stage provide a satisfactory funnel and whether enough ideas are being “killed” to allow the concentration of those that are most promising.
Digital Technology Solutions for Portfolio Management
Many companies have invested heavily in business processes and tools to support the design, supply, manufacture and sale of new products but when it comes to innovation strategy, ideation, portfolio management and cross-functional execution, organisations have little or no process support. A collection of spreadsheets and documents make it extremely difficult to make critical decisions which will determine the cost and the value of a new product.
An enterprise management digital system such as Sopheon’s Accolade software provides innovation governance solutions that help to improve and support these neglected process areas and enable users to align innovation activities across the entire lifecycle.
Want to know more about Innovation Governance and Portfolio Planning
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Want to discuss your Innovation Portfolio Strategy and identify the holes?
Contact Prodex Systems Senior Innovation Consultant and Managing Director, Gerard Ryan email@example.com