Key Obstacles to Innovation Performance

Innovation has become one of the most important factors for long-term success. Because of the fast pace of global innovation and change, organisations must improve their performance more frequently than ever before. Although the ability to develop new ideas fast is essential to innovation, even the organisations that are able to move fast can face obstacles in managing global innovation and change. In fact, according to McKinsey’s Global Survey, only 4% of the respondents say that they haven’t faced any specific challenges with regard to launching new innovations. The biggest barriers to innovation aren’t caused by external factors but come from within the organisation. BCG’s Global Innovation study shows that the top obstacles for innovation performance are mostly related to choosing and executing the best ideas, but also, the company culture.

The upside of these barriers is that compared to external factors, such as market conditions or legislation, they can be removed.

So, what are the key obstacles to innovation performance?

Not knowing how to make sense of innovation

Innovation means different things to different kinds of organisations. Because there are many different ways to define innovation, it can sometimes be overwhelmingly difficult to create a common understanding of why it is important and what it really means.

Quantifying abstract concepts, such as innovation, isn’t always the easiest activity, and for some, it’s a lot easier to just withdraw from making changes and keep doing what they’ve always done. However, not knowing what you’re supposed to do isn’t a legitimate reason to just forget about innovation. Although you obviously shouldn’t innovate for innovation’s sake, you should understand the real need for change.

There’s not only one path to innovation as each organisation chooses its unique approach to solving unique problems. You should be able to create a clear vision of how your company’s competitive advantage will be formed in the future and build an organisation that is constantly evolving and innovating to strengthen that vision.

Apple’s vision, for example, is to keep delivering exceptional design, whereas Amazon is focused on customer experience. A smaller organisation, on the contrary, may want to focus on incremental innovation to improve their operational efficiency. Because all companies have different goals and available resources, you shouldn’t compare your innovation performance to others’. Instead, it makes sense to define what innovation means to you, talk about it in terms of tangible goals and outcomes and constantly focus on becoming better than you were yesterday.

Risk-averse culture and fear of failure

According to the Government Office for Science, uncertainty and risk of failure are intrinsic aspects of new innovations. Innovation is not about completely avoiding but rather managing a diversity of risks.

Risk can be measured and quantified by calculating probabilities. Being exposed to risk is an inevitable part of any business, but when it comes to new innovations, maximizing value is often the reason why business decide to invest in less risky projects.

Uncertainty, on the contrary, isn’t as easily measured, at least in terms of probabilities. The biggest problem is that companies don’t know how to manage uncertainty: it’s not possible to calculate a traditional business case, evaluate risks and decide whether or not to proceed with the idea.

There is, however, a way to manage uncertainty. Tim Kastelle – innovation author, speaker, and consultant says you should: “Treat new initiatives as a series of experiments, which are designed to gather knowledge about your market. As you learn, the uncertainty is reduced, and you can scale up your investments.

A concrete tool for the job is discovery-driven planning that can be used to articulate the unknown and forcing a discipline for learning. It can help adopt a practical approach to innovation that reduces your risks and helps seize new opportunities.

Impacts on organisational culture

The other side of this problem is that risk adversity has a direct impact on company culture and its ability to adopt global innovation and change. When organisations start avoiding risk and aim for maintaining the status quo, people will start fearing the consequences of suggesting a change that is needed to innovate. A risk-averse mindset and sticking to the status quo can lead to innovation “neglect”.

As described in the previous article “Why mindsets matter in digital innovation”, the right mindset is crucial as it sheds light on an organization’s unique cognitive preferences, shapes strategy formulation, and the way in which resources and talent are harnessed and maximized. Tools, such as OGI® (The Organizational Growth Indicator®) can be used to understand, quantify and shift the organisation’s cognitive style to processing information, making decisions, addressing tasks and solving problems.

Although it’s true that the probability of a single idea to fail is quite high, the average percentage of successful innovation projects in organizations with proactive innovation-to-risk cultures is nearly 50% whereas, in organizations with a passive innovation culture, the success rate is only 15%.

Source: Innovation Excellence

Managing global innovation and change

This shows that the willingness and ability to see risk as an opportunity have a significant impact on the success rate of innovation.

It’s a positive loop:

  • When the culture supports agile decision making and “fast failure”, people are more willing to come up with and execute new ideas.
  • When people aren’t afraid to express their hopes and desires, more ideas are generated and implemented, which strengthens innovative company culture.

This obviously doesn’t mean that you should start taking more risks but to learn how to remove uncertainty instead. Although it will never be possible to foresee all the consequences of an innovation, playing it too safe with your innovation efforts, can be the biggest risk of all.

Innovation not integrated into the existing systems

There has been a lot of debate about whether innovation should be managed internally or whether it should be separated from the core business.

According to Clayton Christensen in his book Innovator’s Dilemma, it makes sense to have separate innovation units and labs to test and validate new ideas quickly. As long as these ideas, prototypes and concepts are integrated back into the business units and aren’t isolated from the actual needs of a customer, it fulfills the purpose of innovation.

The Corporate Startup sums up the point quite well: “Innovation is the creation of new products and services, that deliver value to customers, in a manner that is supported by a sustainable and profitable business model. This is the job of innovators. If your Innovation Lab does not do this, calling it an Innovation Lab is a misnomer. Better to call it: The Lets Hangout and Work on Cool Stuff Lab.

The same point applies to smaller organisations: hiring one innovation manager and giving them a budget isn’t innovation. We all know that having one dedicated person for driving change isn’t a sustainable way to manage innovation, especially not in the long-term. Instead, new innovations should be integrated into the systems, learning programs and actual ways of working on all levels of an organization

Lack of strategic alignment

Strategic alignment seems to be one of the most common obstacles, as nearly 55% of innovating companies have reported struggling to bridge the gap between innovation and overall business objectives.

I see this mostly as a leadership issue, as it often happens when leaders lack clarity on how to innovate, or they fail to communicate strategic objectives and align performance metrics according to these goals.

The purpose of new innovations is to sustain and grow a company over the long term. To be able to achieve these long-term goals, strategic alignment is crucial. For example, if your goal were to build a scalable inbound marketing engine, you probably wouldn’t invest time and money on handing out flyers at the nearest railway station. Same applies to innovation, why invest in random projects that don’t have the potential to bring you closer to your overall business goals?

Innovation not treated as a priority

To make global innovation and change happen, new innovations should be prioritized. With busy schedules, day-to-day tasks will always come first, as people don’t have time to focus on anything other than their jobs. Unless you’re actively arranging a time for coming up with new ideas and improvements, it’s difficult to see desired results.

The solution to this issue is top management – if it’s on a manager’s agenda, it becomes a priority. If top management is lacking commitment and support, it has an impact on all levels of an organisation.

In fact, according to The 2018 Global Innovation 1000 survey, companies with higher revenue growth compared to their competitors were more likely to say their company’s executive team was closely involved with the R&D program.

However, no matter how important innovation is seen, it will be difficult to make global innovation and change happen without the right structures and responsibilities in place.

Final thoughts

To avoid these and many other obstacles, you should understand that innovation is not just a single event but a challenging ongoing process that integrates with your business processes and aligns with your strategy and vision.

Understanding the real need for making innovation happen in your organisation is crucial for success. To succeed, you must first make sense of it by defining what innovation really means for your organisation and planning which actions will help you get better at what you’re doing.

When you know what you want to achieve, you can start transforming the way you work and engaging people in learning how to share their ideas and developing them on all levels of an organisation, especially if you are taking the path to digital transformation and developing new innovations.

About our guest blogger

Julia Myllylä represents Viima, the best way to collect and develop ideas. Viima’s innovation management software is already loved by thousands of organizations all the way to the Global Fortune 500. She is passionate about helping leaders drive innovation in their organizations to develop and renew their ways of working and frequently writes on the topic, usually in Viima’s blog. She’s also contributing to other premiere destinations for content related to leadership, innovation, and culture.  Julia’s goal is to demystify innovation with her content and help readers make innovation a part of their everyday lives. She’s constantly looking for ways to learn and improve while helping others do the same.

Viima is on a mission to help organizations make more innovation happen. Viima’s innovation management software is already loved by thousands of organizations all the way to the Global Fortune 500. By deploying Viima’s easy to use SaaS idea and innovation management solution, any organisation can start to harness the creative power of their employees and promote an entrepreneurial mindset.

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