Innovation Management

What is innovation management?

Innovation is not invention. The economist Joseph Schumpeter showed this in the early twentieth century: an invention only becomes an innovation when it finds its place in the economy, in other words when a market takes it up. Between the two lies a great deal of work on product development, trade-offs, funding and diffusion. Innovation management is the discipline that organizes that work: in modern companies, it is treated as a business process in its own right, with its own tools, its own budget and its own review.

It is also different from managing R&D. Research and development produces knowledge and technology; innovation management decides which of them deserve a project, with what resources, which people and what time horizon. In the companies that succeed, R&D, marketing and operations share knowledge from the very first stage instead of handing the baton from one department to the next. A brilliant technology without a market remains a curiosity; a modest technology that meets a real customer need can change a whole industry.

Since 2024, innovation management even has its own international standard. ISO 56001 describes an innovation management system, in the same way as ISO 9001 does for quality management: a leadership commitment, a policy, processes, resources and a regular management review. Certification is optional, but the standard offers a common language that many organizations now use as a checklist. Companies that already run a quality management system will recognise the logic: innovation management borrows its cycle of continuous improvement, while accepting that the quality of an idea cannot be judged as early as the quality of a finished product.

Which type of innovation?

The OECD Oslo Manual, the international reference for innovation statistics, long distinguished four types of innovation: product or service, process, organizational and marketing innovation. Its 2018 edition groups them into two broad families, product innovation and business process innovation. Either way, a business innovates just as much by launching a new product as by changing the way it produces, sells or works together.

Another useful distinction concerns the degree of novelty. Incremental innovation improves what already exists; disruptive innovation, a term made famous by Clayton Christensen, changes the rules of a market and often comes from a new technology that incumbents first dismiss. Between the two, adjacent innovations take an existing product into a new market or bring a new technology to existing customers. Each type of innovation calls for a different type of management: the same rules cannot apply to a packaging improvement and to a new business model. The operating model, too, must fit the ambition. Most successful organizations run several innovations of each type at once, from small product innovations to new services, and use the profits of the core business to fund the riskier bets.

The four levers of innovation management

A clear strategic direction

Without a direction, innovation efforts scatter into pleasant initiatives that go nowhere. Senior leadership has to say where the business wants to innovate, with what ambition and how much risk: improve what already exists, move into neighbouring markets or prepare a breakthrough. This strategic choice is then translated into an innovation strategy, a budget and a few clear priorities that everyone can remember. We describe this approach, from the initial diagnosis to the roadmap, on our page on building an innovation strategy.

A readable innovation process

The innovation process describes the path of an idea all the way to launch: collection, selection, development, testing, roll-out. It sets the stages, the decision criteria and the people who decide. Well built, it protects fragile ideas at the start and becomes more demanding as the investment grows. It will change as the company learns from each project and from each innovation management review.

An organization that leaves room for the new

Cross-functional working groups, an innovation unit or lab, time set aside for employees' own initiatives, a committee that reviews the portfolio: the organization must allow innovative activities to exist alongside day-to-day business without being crushed by it. The most innovative organizations also give these activities a sponsor on the executive committee, who protects them when budgets get tight.

A culture that allows trial and error

This is the hardest lever to pull, and the most decisive. A company where mistakes are costly only ever gets cautious proposals. An innovation culture is built through the example set by leaders, through the way the company reacts to failure and through the recognition given to those who take the initiative. It is closely linked to the entrepreneurial spirit: the ability of employees to act as if they were running their own business.

Knowledge, technology and digital tools

Innovation feeds on knowledge. A large share of good ideas comes from combining knowledge that already exists in the company but sits in different teams: a technology mastered by one plant, a customer complaint known only to the after-sales service, an industry trend spotted by a buyer. Knowledge management, communities of practice and simple digital tools for sharing ideas make that combination possible. Digital idea management platforms are useful as long as every idea gets an answer within a few weeks; a platform that collects ideas without any review quickly discourages employees.

The environment matters too. An open work environment across the organization, regular contact with customers, partners and start-ups, and technology watch shared with the teams all widen the field of observation. Technology is rarely the limiting factor in innovation; the willingness of the organization to use it is.

The stages of the innovation process

Most companies that innovate regularly follow, under one name or another, the same broad stages. The Stage-Gate model, the best-known process model, put forward by Robert Cooper in the 1980s, made the principle popular: a sequence of stages separated by gates, where a review decides whether to continue, redirect or stop.

1. Observe and collect. Watching markets, technology, digital trends, research and the economics of the industry, listening to customers and to people in the field, analysing data: good ideas often start with an observation that nobody had taken seriously.
2. Generate ideas. Creativity workshops, design thinking, Creative Problem Solving: these creativity methods multiply the options before judging them. We present these creativity tools in our toolkit of ideation methods.
3. Select. Proposals are compared against a few simple criteria: value for the customer, strategic fit, feasibility, risk. This is where the quality of the portfolio is decided.
4. Develop and prototype. Product development turns an intuition into a concrete offer. A prototype, however rough, teaches more than a long report.
5. Test. Experiments with real customers confirm or refute the assumptions before large budgets are committed.
6. Roll out and spread. Production, marketing, brand and training of the sales force, change management internally: an innovation that is not adopted does not exist.

Not every idea passes every gate, and that is normal. A system that stops nothing selects nothing; a system that stops everything too early no longer innovates. At each stage, the gate review is also a moment to share knowledge: what the team learned matters as much as the go or no-go decision.

The leader's role in innovation

Innovation does not only live in board meetings. It depends, every day, on the way each team leader receives a new idea. Three behaviours make the difference between a team that proposes and a team that keeps quiet.

• Give time. At 3M, the 15 % rule has allowed engineers since 1948 to spend part of their time on subjects of their own choosing. The Post-it note came out of it. Without going that far, a leader can set aside a few hours for exploration.
• Protect fragile ideas. A new creative idea does not survive immediate judgement. A good leader separates the moment when people propose from the moment when ideas are assessed.
• Decide without discouraging. Saying no is essential; explaining why, and recognising the efforts made by the team, matters just as much.

These skills are not innate, and developing them takes practice. They can be worked on in individual coaching, team coaching or an innovation course designed for managers already in post. Innovation management then becomes a daily practice rather than a speech.

Organizing innovation: which structure to choose?

There is no ideal organization; there are choices that fit the size and ambition of the company, and organizations of the same size can choose very differently. A small business will often hand innovation to one person reporting directly to the managing director, with a working group set up as needed. A large group will combine an R&D department, an innovation unit or lab, business teams that carry the launches and sometimes an intrapreneurship programme for employees who want to create a new business.

Whatever the structure, three questions need a clear answer: who decides to launch or stop a project, with what budget, and how new initiatives obtain the resources that the core business also needs. Digital technology has made these questions more pressing: development cycles are getting shorter, data and knowledge travel faster, and decisions must keep up. When the competitive environment and the regulatory environment change this quickly, innovation management becomes a subject for the executive committee in its own right.

A common trap is to let the core business absorb every resource. Its activities are predictable, profitable and well known; innovation activities are uncertain by nature. Protecting a share of the budget, of the creativity of the teams, of the best people and of senior attention is a strategic choice, and it has to be reviewed every year.

Steering and measuring innovation management

What is not measured is poorly managed, but innovation is hard to measure with the usual indicators. A useful dashboard combines indicators of effort and indicators of results:

• the number of ideas collected and the share that become projects;
• the time between the first idea and the launch, the well-known time to market;
• the share of revenue generated by innovative products launched in the last three years;
• the balance of the portfolio between improvements and riskier bets;
• the perceived quality of new products and their effect on the brand image, measured with brand surveys.

These figures are there to support decisions, not to punish. A project stopped early enough is good news: it frees resources for the others. The dashboard also feeds the annual review of the strategy, where leadership adjusts the course in light of the competitive environment and of the knowledge gained.

How we support innovation management

We work with chief executives, leadership teams and managers in Paris, Lyon, Geneva and internationally. Our perspective is that of a former business leader: Marc Prager held senior management positions at Xerox, Groupe SEB and Lactalis before becoming an ICF certified coach (PCC). He knows from the inside the tension between quarterly results and long-term bets in a fast-moving digital economy, where innovation efforts must pay off without killing the brand, and the creativity and entrepreneurial spirit that have to be preserved at the heart of any change.

• Coaching helps a chief executive or head of innovation clarify their choices, hold the course and bring their teams along, over a series of sessions.
• Consulting brings an outside view of your organization, your tools and your portfolio: discover our approach as innovation consultants.
• Training develops managers' skills with practical tools to run creativity sessions, sort ideas and lead an uncertain project.

Every programme starts with a first conversation about your situation, your ambitions and what you expect from innovation. Our courses and coaching programmes then adapt to the pace of your business, your industry and your markets.

FAQ

Further reading

• Defining an innovation strategy, from diagnosis to process
• Working with an innovation consultant or coach
• Developing a culture of innovation in teams
• Training managers to innovate: mindset and the DOJI method
• Ideation, design thinking and CPS: the methods

This article was written by Marc Prager.