Executive Street News

Part 2: For CEOs, what are the FOUR critical innovation barriers that must be addressed (2 of 4)

October 26, 2010 • • Print

This is a guest post by Vistage Speaker Jatin DeSai.

In my last post, I mentioned that every CEO and business executive who intends to lead innovation as a strategic agenda will need to address four critical barriers to innovation.

The second barrier is not recognizing and then not aligning the abundance of resources available to large organizations for investment in innovation. Even when overwhelming evidence shows that the companies who invest in innovation consistently outperform their peer groups, why haven’t most organizations taken innovation seriously?

The challenge is not that an organization does not have resources to invest in innovation; rather it’s where to most effectively funnel those resources, and how to do it.

Innovation in most organizations should be a mandate that cuts across functional areas. Problem with that in most organizations is the current organizational structures makes effective resource allocation decisions very difficult – which no one has time to deal with. It requires tremendous top-down courage and political savvy.

The few common themes that arise are: prioritizing effectively for the same competing resources across business units, designing solutions that may be ideal for a single business unit but not for the corporation as a whole, and balancing between the need to build markets while servicing existing customers.

The bottom line: resources are available, but the allocation and ownership for innovation is fragmented responsibility across most companies. There are three options to quickly overcome this barrier:

1)      Develop a central innovation structure – including funding to help internal businesses quickly welcome innovation in their areas. Once initial ideas

2)      Develop a hybrid innovation structure – which centralize core capabilities, but shares accountability and risks between corporate and lines of business.

3)      Develop a Center of Excellence structure – centralizes core innovation capabilities and resources for business areas based on their respective needs.

Stay tuned to Part-3,4.

-Jatin DeSai

CEO, The DeSai Group

www.desai.com

In Business Innovation
  • Ohara30075

    One way to get around the cost of developing a technology is to partner with another company.

    I have seen this work twice in companies I have worked for. For instance, we came up with the concept that would eliminate one very laborious and time consuming step in the manufacturing process. We approached a leading manufacturer about making what we needed and they agreed to modify an existing product to meet our needs. We virtually hammered our competition and in less than 3 years, 90% of our regional competitors had permanently closed their doors and the other 10% were in trouble.

    Our investment? Just a few thousand dollars! Certainly almost any business can afford that investment for the results achieved. We did it with only a handful of employees and a very small market share. We were in a business where virtually all work was competitive bidding. With all those competitors gone, prices shot up and our small investment was quickly repaid.

    In another case, I developed an idea around existing technology and had one of the largest companies in America do the “nuts and bolts” development of the hard part of the technology. My company (two people) developed the software to run the system. Our investment was in time, not dollars.

    Any company no matter how small even just an owner or two can take this route successfully. Find an area in a current industry and figure out how it can be improved for a better product or for labor savings. Get it on paper so that anyone can understand the concept and go out and sell it to a larger company that can develop the idea into a marketable product or service and let them do the development work. Everybody profits in this approach.

    .

  • Ohara30075

    One way to get around the cost of developing a technology is to partner with another company.

    I have seen this work twice in companies I have worked for. For instance, we came up with the concept that would eliminate one very laborious and time consuming step in the manufacturing process. We approached a leading manufacturer about making what we needed and they agreed to modify an existing product to meet our needs. We virtually hammered our competition and in less than 3 years, 90% of our regional competitors had permanently closed their doors and the other 10% were in trouble.

    Our investment? Just a few thousand dollars! Certainly almost any business can afford that investment for the results achieved. We did it with only a handful of employees and a very small market share. We were in a business where virtually all work was competitive bidding. With all those competitors gone, prices shot up and our small investment was quickly repaid.

    In another case, I developed an idea around existing technology and had one of the largest companies in America do the “nuts and bolts” development of the hard part of the technology. My company (two people) developed the software to run the system. Our investment was in time, not dollars.

    Any company no matter how small even just an owner or two can take this route successfully. Find an area in a current industry and figure out how it can be improved for a better product or for labor savings. Get it on paper so that anyone can understand the concept and go out and sell it to a larger company that can develop the idea into a marketable product or service and let them do the development work. Everybody profits in this approach.

    .