Innovation: Build it, borrow it, or buy it. Just don’t forget it.

Innovation: Build it, borrow it, or buy it. Just don’t forget it.

Disruptive innovation is top of mind for business leaders these days, and with good reason. Disruption is finding its way into every business sector. And in this environment of fast-evolving technology, it can happen quickly, leaving an organization’s primary revenue stream ripe for the taking. (Remember what Netflix did to Blockbuster?)

Some organizations are aiming to be the change agents. Some are reacting to innovation. Others are continuously working to protect—or worse, defend—their customer bases from potential upheaval by unconventional and unforeseen competitors. Who will emerge as the winners? While it is not necessary to be the disruptor to be successful in the future, it is necessary to at least plan for innovation so your organization is not compromised when customer expectations evolve and new technologies arise in the market.

Embracing innovation is essential to growing and thriving in a “disrupted” business environment. Most organizations engage in some level of innovation, but what does it mean to embrace innovation? True innovation stems from a culture that emphasizes creativity and allows risk taking. Over the course of my career, I have been fortunate to work with, lead, and observe innovative organizations – and to take away a few lessons.

First, allocate resources—people, budgets, and time. How much of your enterprise’s resources is a topic for another day and will depend on your business and competitive environment. The point is to make innovation a part of your formal strategic planning and budget process, to establish accountability for it, and then measure the return on investment. As an example, we currently budget 2% of our annual topline revenue to innovation. And I know of some in our industry that budget a lot more than that.

Second, be willing to accept and tolerate failure. In today’s environment, it’s hard to be the innovator when you wait to dot every “i” and cross every “t.” Someone else will get there first. You must be able and ready to move fast, and that means taking some risks. There are going to be some mistakes: Accept them, and then move on quickly – or in other words, “fail fast.” This may run counter to culture, but being open about it and following through by moving quickly to the next opportunity can start to shift acceptance and momentum.

Third, carve out some institutional muscle that focuses on how you will serve the customers of tomorrow, not just your customers of today. This is something we committed to doing several years ago – devoting resources to continuously think and plan for the future. It takes resolve, patience, and commitment to do this, as you may need to dedicate some of your top performers to be non-revenue-generating for a while. We also empower our people to bring ideas for products and services that address unique and emerging market needs – and then fund activity to develop certain ideas. This is how we brought to market our successful Rapid Analytics Platform offering innovation, which accelerates an organization’s path to data warehousing, integration, and analytics to a matter of weeks.

While these are all strategies for building innovation, you can also borrow it by leveraging start-ups, incubators, consulting-firm talent, or even business schools. Incubators help nascent businesses develop in group settings, and partnering with them allows your organization to serve as a “test” for various emerging products and solutions without significant risk or investment. (If you like the product or solution, you can further invest and buy it.) Likewise, many business schools are establishing formal innovation programs to meet the growing corporate demand for testing new things quickly. For example, Illinois Business Consulting is a student-run consulting organization at the University of Illinois that conducts more than 70 projects every year with organizations of all sizes. (We are one of them.) And at Carnegie Mellon’s Integrated Innovation Institute, students work in teams to develop new products and services on behalf of corporate sponsors. One team innovated a built-in robot that cleans cars for Nissan.

Other organizations are “buying” innovation through strategic acquisitions. A large insurer, for example, employs “innovation scouts” to prowl the marketplace for useful disruptions – with the hopes of finding them first. Our new research study with Mergermarket also shows M&A is on the rise for software, with 57% of private equity and corporate buyers planning three to four software acquisitions over the next 24 months.

If you don’t find innovation, it will find you – and when it does, it may not necessarily be to your benefit. Start allocating your precious and understandably limited resources for innovation. Include innovation in your short- and long-term strategies. And act like an entrepreneur by solving tomorrow’s problems while still wowing the customers of today. Do these things and your organization should have a bright future.

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Phone: 312-602-4000
Email: marketing@westmonroepartners.com
222 W. Adams
Chicago, IL 60606
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