What is innovation control, and how do you control innovations?

Munther Al-Dawood- Enterprise Expert (maldawood@growenterprise.co.uk)

Oct 31

Innovation activities in any organisation shall need control to ensure that actual outputs are as per plans. Controlling involves many tasks, like aligning activities, monitoring and reviewing performances, quality checks, testing, assessment of impact, and change actions. In this article, I discuss the meaning of innovation control and the means to control innovations.

Overview of the innovation control

Innovation processes that involve observation, understanding issues, creating solutions and prototypes, experimenting, and implementing, need a variety of activities to maintain compliance with the vision and strategy of innovation. Controlling means ensuring conformity of results with targets, and the popular way to any business control is to plan, execute planning and audit progress and outputs to ensure compliance. The value of controlling lies down on the action agility, correction of deviations, and efficient management of resources. Innovation control involves many activities like aligning activities, monitoring and control, quality checks, testing, assessment of impacts, and change management.

Aligning activities

Aligning activities means that all innovation efforts are geared toward meeting the innovation strategy. Alignment specifically reveals that innovation activities like inspiration, synthesising, ideation, and implementation are aligned with the corporate's innovation strategy; as a result, a company ensures that the innovation activities will lead to achieving its strategic goals and projects. Alignment reveals that a company's business strategy, innovation business model, organisation, and leadership approach are all geared toward, and supportive of, the innovation process and the company's payback goals (Andrew and Sirkin, 2006)¹. Companies align innovation activities with their visions and strategies to focus, reduce the risk of failure, and avoid any waste that may result from engaging in irrelevant activities.

Reviewing performances

Companies review their performances by monitoring and controlling results in line with targets. Innovation performances subject to evaluation may include inspiration, synthesising, solution and prototyping, and implementation. And management sets plans and targets for innovation projects and frequently monitors them to ensure conformity. The core inputs of any business review are setting clear targets and KPIs, like the number of ideas or projects developed and deploying a system for controlling performances. How does it work in the corporate environment? The section in charge of innovation will prepare reports (e.g., every month or quarter or half year or year), monitoring activities and progress made toward innovation objectives and highlighting any deviation possible from targets and actions recommended for correction. In reviewing performances, corporates will have a system in place, mandated with trained teams to review results, prepare progress reports frequently, evaluate and communicate findings with the concerned staff, and follow-up actions.

Quality assurance and control

In Kelley's book 'The ten faces of innovation', he grouped the faces of innovation required by the organisation into three sets of personas: (1) learning persons, (2) organising personas and (3) building personas (Kelley and Littman, 2005)². A company will need to quality control all these faces activities to ensure innovation conformity. Quality issues are essential for any firm to ensure compliance with the targets and acceptable standards to make innovation. The quality expert W. Edwards Deming defined quality as 'Good quality means a predictable uniformity and dependability with a quality standard suited to the customer.

Quality is a process of conformance to requirements set by customers and standards authorities. A product or service is of acceptable quality if it only abides by the customer requirements and authority standards. In the corporate environment, quality is key to making products and services that meet the quality policy. The quality of innovation reveals the degree of conformity to set standards, covering the design, features and functions of underlying products or services.

Quality management in nowadays business environment becomes the total quality management (TQM), which assumes the quality responsibility for all and comprises all quality-related activities, including quality policy, quality planning and assurance, quality control and quality improvement. Total quality management aims to hold all parties involved in the business processes accountable for the overall quality of processes and final products.

To ensure conformity of quality, management must first draw a quality plan. Then, appointing quality teams mandated with the quality plan to carry out the quality management tasks. In a quality plan, quality standards like metrics, targets, and checklists for all innovation processes and outputs are well defined to ensure quality. After then, quality teams will carry out quality planning, assurance and control to ensure full compliance of results with quality targets. In case of any disconformities, management decides on changes to plans and corrective actions to ensure full compliance.

Testing

Every innovation project is subject to four typical tests. They are (1) the desirability test (i.e., what people desire or want), (2) the feasibility test (i.e., what is technically and organisational possible to product innovation product?), (3) the viability test (i.e., what can be financially profitable?), and (4) the scalability test examining the potentiality of a business concept to grow. These tests describe the criteria for managing innovation successfully.

Likewise, start-ups go through three kinds of fit (Osterwalder, Pigneur, Bernarda, and Smith, 2014)³:

Problem-solution fit (on paper): occurs when you identify relevant customer jobs, pains, and gains you believe you can address with your value proposition. It passes when you have sufficient evidence customers care about the problem identified and the value proposition proposed.
Product-market fit (in the market): occurs when customers positively react to your value proposition and when it sounds desirable in the market. It passes when you have evidence that your products entail benefits like pain relievers and gain creators, which can create sufficient demand.
Business model fit (in the market and bank): occurs when you find a business model that is scalable and profitable. It passes when you have evidence that your value proposition can be viable and scalable.

According to Ries's Lean Start-up book, start-ups go through various testing called the 'Leap Hypotheses', which are value and growth hypotheses. Testing of value assumption focuses on whether a start-up can create a new value that customers want, whilst growth testing shows if a start-up can scale (Ries, 2011)⁴.

Successful testing is subject to the following guiding principles (Osterwalder, Pigneur, Bernarda, and Smith, 2014)⁵:

Realise that evidence from the market trumps opinion.
Learn faster and reduce risk by embracing failure. Failing cheaply and quickly leads to more learning, which reduces risk.
Test early and refine later. Gather insights with early and cheap experiments before thinking through or describing your ideas.
Experiments ≠ reality. Remember that experiments are a lens through which you try to understand reality. They are a great indicator, but they differ from reality.
Balance learnings and vision. Integrate test outcomes without turning your back on your vision.
Identify idea killers. Begin with testing the most critical assumptions; those that could blow up your idea.
Understand customers first. Test customer jobs, pains, and gains before testing what you can offer them.
Make it measurable. Good tests lead to measurable learning that gives you actionable insights.
Accept that not all facts are equal. Interviewees might tell you one thing and do another. Consider the reliability of your evidence.
Testing processes in start-ups for leap hypotheses include the following steps:
Identify your hypotheses: what needs to be true for your idea, product, or business model to work? Use the value proposition and business model (Canvas) to identify what to test before you "get out of the building."
Prioritise your hypotheses: what could kill your business? Give importance to what hypotheses are most critical to survival.
Design your experiments: include (1) describe the hypothesis you want to test, (2) produce a minimum viable product (MVP) that helps you learn and test as quickly as possible, (3) outline the experiment you will design to verify if the hypothesis is correct or needs to be rejected and revised, and (4) identify metrics and criteria to accept or reject any hypothesis.
Run experiments, collect data from the market, capture insights, and accept or change or reject the hypothesis.
How quickly are you learning? How fast you and your team can be through the design/build, measure, and learn cycle?

Assessment of impact

Every innovation project aims to boost the wealth of the firm. The following are some examples of innovation impacts on firms:

Enhance market leadership: a firm that innovates disruptive products or develops breakthrough technologies will have market leadership over other competitors. Measuring this market impact can be achieved by setting the key performance indicators and metrics as market share and sales.
Increase customer experience: innovations empower the firm to create unique solutions and value propositions, make competitive offerings, improve distribution channels, increase reach-out to customers, and strengthen brand loyalty and after-sale services. Measures may include quantified customer satisfaction, market share, sales, customer retention and growth, or customer lifetime value CLV.
Improve operational excellence: process innovation impacts production costs, increases productivity, reduces the lead time to the market, eliminates wastes, improves product quality, and increases the efficiency of resource management. Operational measures may include cost reduction, productivity, lead time to market, wasting rates, customer complaints, etc.
Motivate profitability and cash flows: one of the direct benefits of any innovation is increasing the profits and cash flows a company makes over the years. Profitability measures may include gross profit margin, operating profit margin, net profit margin, cash flows, return on investment ROI, and payback period.
Accelerate learning and growth: innovation impacts how a firm sustains its ability to change, improve, and scale. Innovations result in corporate learning and increasing sales and operation. Corporate learning and growth come from three principal sources: people, systems, and organisation. Businesses that aim to create innovations need to invest in reskilling employees, enhancing information systems, and aligning procedures and routines. Learning and growth measures include employee satisfaction, productivity, training, staff turnover, and growth rate in sales.
Improve organisational vitality: innovations impact the enterprise assets like preference, exclusivity, standards, confidence, and attractiveness. The preference factor shows the improvement made in the choices of selection of the company over its competitors. Exclusivity means the firm ownership of unique assets over competitors, like unique value propositions, higher quality, competitive advantages, or assets that are difficult to be imitated or copied. Standards mean an innovative company may gain support for industry standards it favours. Innovation improves the company's confidence in retaining and embracing success, and finally, people with creative ideas and perspectives usually want to work in innovative companies. Corporate measures may include market share, brand loyalty, number of innovation ideas created, number of successful innovation projects implemented, staff turnover rate, staff retention rate, and number of talented people appointed.

Steps to measure innovative performances may include (Drucker, 1985)⁶:

Feedback: is information collected, especially from outside the firm about business variables. It is embedded into each innovative project, studying feedback from results to expectations.
Reviewing: includes developing a systematic review of innovative efforts. Every few years, entrepreneurial management looks at all the innovation efforts of the business. Which projects should receive more support? Which ones have opened up new opportunities? Which ones are not doing well?
Judging: entails evaluating the company's innovative performances against objectives, market requirements, and overall business performance.

Tools widely used to measure performance and innovation impacts include return on investment ROI and a balanced scorecard. Estimating the ROI is by summing the net benefits of a project divided by the project costs (Phillips, J., and Phillips, P., 2018)⁷. A balanced scorecard is an analytical tool that derives from the organisation's vision and strategy. The objectives and measures view the organisational performance from four perspectives: financial, customer, internal business process, and learning and growth (Kaplan and Norton, 1996)⁸.

This post is sourced from my new book- Your Guide To Reach Innovation.
For more information about the book: https://growenterprise.co.uk/your-guide-to-reach-innovation/
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Final note: the book- Your Guide To Reach Innovation, is an actionable guide to innovation from beginning to end. Enjoy reading the book, and I look forward to your reviews.

Author: Munther Al Dawood

www.growenterprise.co.uk

maldawood@growenterprise.co.uk

References:

Andrew, J. and Sirkin, H., 2006. Payback, Harvard Business School Press, Boston Massachusetts.
Kelley, T. and Littman, J., 2005. The ten faces of innovation, Random House.
Osterwalder, A., Pigneur, Y., Bernarda, G., and Smith, A., 2014. Value proposition design, Wiley, New Jersey.
Ries, E., 2011. The lean start-up, Crown Business New York.
Osterwalder, A., Pigneur, Y., Bernarda, G., and Smith, A., 2014. Value proposition design, Wiley, New Jersey.
Peter Drucker, 1985. Innovation and Entrepreneurship- Practice and Principles, New York, Harper & Row Publishers.
Phillips, J., and Phillips, P., 2018. The value of innovation, Wiley, NJ USA.
Kaplan, R. and Norton, D., 1996. Balanced Scorecard, Harvard College, Boston Massachusetts.