Companies thrive on predictability, a characteristic not traditionally associated with innovation. Innovation is messy, especially when you open it by bringing in external ideas and technologies. Counterintuitive though it may seem, by adding the right structure, open innovation can become not only predictable, but a sustainable competitive advantage.
Strong processes = Strong performers
A recent survey on Open Innovation in large companies revealed that 78% report practicing open innovation, but most lack standardized procedures and decision-making driven by metrics. Results from the Boston Consulting Group’s survey, The Most Innovative Companies 2013 indicate that the lack of strong processes is actually holding these companies back.
What gives innovation leaders their edge? According to BCG, strong processes are one of the most important innovation strengths. Strong performers are more likely to use standardized processes for tracking project development and for applying clear and transparent decision-making criteria. As proof, BCG points to Procter & Gamble.
P&G uses a rigorous four-stage process to make innovation systemic, replicable, reliable, and integral to its business. Their efforts have paid off with three P&G products in the top ten most successful product introductions in 2012 (according to research firm SymphonyIRI). Want more proof of the impact the right process and tools can have on an innovation program? Just look at Whirlpool’s dramatic innovation turnaround.
From innovation zero to hero
Beginning from its relatively non-innovative origins, Whirlpool has rapidly turned innovation, including open innovation, into a core competency. Before its transformation, Whirlpool was a conservative company in a slow-moving, commodity business fixated primarily on quality and price. In 1999, driven by a directive from the CEO, Whirlpool sought to become a leader in innovation and to set the pace of change in their market.
As JD Rapp, VP, Business Process Management at Whirlpool Corporation, explains, their innovation process is highly structured by design. Open Innovation is worked directly into this process, serving not as a stand-alone strategy, but rather as support for discovery, technology development and commercialization. The illustration below represents the workflow used by Whirlpool, covering everything from idea generation and business case formation to experimentation and large scale commercialization.
Each stage includes stringent requirements for moving forward. Typically, only 1 idea out of 10 will advance. Before an innovation project makes it to market, it must compete against mainstream projects for resources. This process ensures that only the best projects, wherever they’re from, are launched. Rapp emphasizes that innovation projects are given go/no go decision because of processes and tools, not just opinions. To encourage participation and information dissemination, any employee can log-in to see details of any idea using Whirlpool’s Innovation Pipeline. Whirlpool also keeps track of shelved or cancelled projects.
The outcome of their efforts is remarkable. Prior to the transformation, average sales values were declining approximately 2% per year. That trend has been completely reversed, with prices climbing on average by 2% in aggregate. Revenues are also up, according to the 2012 Whirlpool Annual Report, revenues for 2012 were up 3%. Additionally, Whirlpool has finally been ranked amongst the most innovative companies.
Making innovation reliable
Making innovation predictable isn’t as impossible as it sounds. The successes achieved by Whirlpool and P&G demonstrate that innovation can be a reliable, systemic part of the business. Whether it’s Open Innovation, Technology Scouting, internal Innovation Management or some mix of the three, standardized processes and tools offer the structure that enable innovation to thrive. In our experience, software plays a key role in adding structure while still allowing the system to be flexible, efficient and not a burden. Visit the Inova website to learn more about how software supports open innovation and about the capabilities and functionalities key to a successful open innovation program.