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The basic rules for agile innovation management

As globalization and digitalization progress, companies today need to respond quickly to changing market requirements and develop new business models. The technologies and methods for this are available, but 70 to 90 percent of all new products still fail due to rigid structures.

In order to anchor agile innovation management in the company, the corporate culture and thus also the management style must change.

Agile innovation management pays off

Agility is becoming increasingly important in the course of high technological dynamics. The correct implementation of agile innovation management in companies has a proven positive effect on the profitability as well as innovation and competitiveness of a company. 

For example, the study Digital Engineering: Agile product development in the industry, for which Bitkom Research surveyed around 500 executives in companies, shows that there is a close connection between agility, innovative ability and the degree of digitization of companies. Likewise, Capgemini's Change Management study demonstrates a positive correlation between agile methods and business success and shows that agile companies have advantages in digitization. The Agile Innovation bain study also demonstrated that the probability of success of innovations triples through the use of agile methods, while at the same time reducing development times and increasing team productivity.

The Institute for Innovation and Industrial Management at the Graz University of Technology has come to similar conclusions in its research work on the topic of agility. The studies show a clear correlation between the agility of companies and their profitability as well as break-even levels:

  • Agile companies with a break-even level (BE) of less than 60 percent of sales come to just under 12 percent return on sales.
  • On average, agile companies with a BE between 60 and 80 percent achieve a return on sales of only 7.4 percent.
  • Below-average agile companies with a BE greater than 80 percent achieve a return on sales of only 2.5 percent.

Agile companies that can adapt and allocate their resources faster than others thus achieve an average shareholder return that is 2.4 percent higher than non-aggressive companies.

Agile innovation management needs agile corporate culture

Agile innovation methods are only slowly gaining acceptance and are far from being part of everyday business life. Although digitization is an important driver and tool for agility, the technology alone is not enough. The cultural preconditions in companies must also be created in order to be able to establish agile forms of work and management structures.

According to a survey conducted by Great Place to Work, only 9 percent of employees in German companies are currently "agile" and more than 60 percent are critical of agile methods. In the Agility Barometer 2017, 90 percent of employees and 70 percent of managers state that they never use agile methods. According to a study by the Academy of Executives, managers identify silo marking in the individual parts of the company as the main blockade: Areas do not work together, but against each other, the flow of information stops at department boundaries and employees are not only geographically separated, but also in the understanding of the market.

The basic rules for agile innovation management

Many companies find it difficult to implement and live agility. It often contradicts the existing corporate culture or lacks experience in dealing with agile processes or the support of management. Six basic rules must therefore be observed in order to successfully exploit the potential of agile methods for innovation processes:

1. Develop the right understanding of agility

Agility does not mean anarchy, but rather offers a tried and tested approach to solving complex problems.

2. Select the appropriate application areas

Not all divisions are suitable for agile methods. For example, they offer no particular added value for routine tasks. In product development, marketing and strategic planning, on the other hand, they can be used wisely to develop a solution step by step in coordination with customers and partners.

3. Start pilot projects and use word of mouth propaganda

Employees in agile pilot projects are usually very satisfied with their greater independence and the gain in decision-making freedom. They act as ambassadors of the agile innovation culture and help to win others for this working method by word of mouth. This makes them valuable intermediaries for the introduction of agile methods in other business areas.

4. Enable agile methods to be adapted by experienced users

Modifications and individual adaptations of agile innovation methods such as Scrum only make sense when an employee or a team has full command of them. However, experienced employees should be allowed to adapt agile methods over time and further develop them according to their ideas. It therefore also needs managers who ask questions instead of giving orders, in the sense of "What would you suggest" or "How could we test this?

5. Use agile methods in top management

In order to anchor agility in the corporate culture, it is by no means sufficient to simply introduce employees to the agile approach. The company's top management should also apply agile methods to their own activities. Strategic development, resource allocation or coordination within the company are suitable areas of application. In this way, management exemplifies agility and speaks the language of its teams.

6. Removing obstacles

Surveys show that over 70 percent of the use of agile methods leads to tensions between agile teams and the rest of the workforce. To overcome this resistance, managers need to communicate clear priorities, roles and responsibilities.

Conclusion: The basic rules for agile innovation management

In order to anchor agile innovation management in the company, the corporate culture and thus the management style must change: Managers should not be allowed to slow down their employees, but should provide them with the necessary freedom. Many companies still lack the experience with agile innovation methods and therefore often lack the courage to convert to agile innovation processes.

However, it is not necessary to change the entire company at once; agile methods can also be tested in individual projects. This helps to break down prejudices in the workforce and slowly anchor agility in the corporate culture. But only if agility in management is actively exemplified can agile approaches be established in the company.

"Companies do not achieve high agility at the push of a button. On the way to an agile, adaptable organization, companies should gradually adapt their structures and processes".

Bitkom Research Managing Director Dr. Axel Pols

Tanja Eschberger-Friedl

With her clear and focused way of working, Tanja supports you with strategic innovation management and the successful development of product, process, and market innovations. Tanja always keeps an eye on the essentials. Holistic solutions are her aim. She applies her specialist knowledge as a scrum master and agility coach to achieve this.

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