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LEAD Innovation Blog

Read our latest articles on innovation management and innovation in a wide range of industries.

Date: 20-Aug-2019
Posted by: Michael PUTZ
Category: Innovation process

Speed in innovation management: Why startups are faster than large companies

It is no secret that start-ups usually innovate much faster than established large companies. In this article you will learn why this is so and how the speed of innovation management in large companies can be increased.

Obstacles to innovation management in large companies

The innovation process in organizations loses speed primarily due to two factors: an organizational structure characterized by strong hierarchies and silo thinking and democratized decision-making processes.

Paper Innovation process

 

1. Organizational structure

Innovation is something new (invention) that is accepted by the customer (market success). Professional innovation management therefore requires cooperation between the technical areas of a company, usually referred to as R&D, and the area in contact with the market.

However, the organizational structure of large companies is usually not geared to innovation management. Very often, the technical departments are hardly networked with the marketing or sales departments. The exchange that is necessary to associate a new available technology with a new emerging customer need does not take place.

In large organizations, the lack of cooperation between R&D and the market then leads to employees having to work their way up several hierarchical levels within these two areas - either technology or market - in the course of innovation projects. Accordingly, it takes a very long time for a decision to be made.

 

Example: General Mills

A few years ago we carried out an innovation project in the USA for General Mills, the fifth largest food manufacturer in the world, for the development of a new packaging. This innovation project was located at the 7th hierarchy level in marketing.

At first it took months until the marketing department found the right contact persons in the technology on the respective mirrored page and convinced their superiors of the innovation project. In order to win the technical department for the project, first 7 hierarchical levels in the pillar had to be overcome up to the joint boss of the two areas, and then 7 hierarchical levels down again to the technical department.

After all, the innovation project could finally start. But before the actual creative process, i.e. the development of the packaging, could begin, it was necessary to decide who would benefit from the new packaging. A decision tree of 14 different variants was up for discussion. A new packaging could be developed, for example, for the Walmart sales channel and its shelf supervisors, for parents who buy the product or for children who prefer to eat the product, etc.

After the decision tree had been executed in detail, a decision had to be made. Of course, no one at the 7th hierarchy level could make this decision and the democratized Silodenken started all over again. Again we had to fight our way through all hierarchical levels. It is obvious that such processes extremely slow down the speed of innovation management.

 

Startups have flexible organizational structures

And this is exactly what distinguishes startups from large companies: They don't have organizational structures where R&D and marketing are divided into different departments, employees work in different buildings, or where R&D centers and market development centers around the world are distributed regionally and geographically dispersed. In a startup, you usually have it all in one small office and the silo thinking is not anchored in the corporate culture and in the minds.

 

2. Democratic decision-making processes

A further reason for the lack of speed in innovation management are larger committees that decide, for example, whether a product is to be further developed and enters the next phase of the innovation process or not.

On the one hand, such meetings often produce concerts of desire according to the motto "It would also be nice if this and that were taken into account". On the other hand, democratized decision-making processes often lack a certain professionalism.

Then the technician suddenly knows at what price the product is to be sold or that the product is much too expensive for the market - although of course he has no expertise in marketing questions. Likewise, marketing people often feel compelled to have a say in what is technically feasible and what is not, even though they have no technical competence at all.

Professionalism in this context would mean that everyone would concentrate on what their job is - the technician on the technical feasibility and the marketing on the marketing issues such as price, POS, etc..

 

The solution: Moderation and promoters for the relevant areas

In innovation management projects we very often hear from members of the project team that this is the first time they are working with their colleagues from marketing or R&D. It's absurd because it's exactly what you need to create innovation. You have to bring market and technology together and align them!

In order to increase the speed of innovation management in large organizations, the areas of management, marketing/sales and R&D must therefore be moderated and accompanied in the innovation process. They are the ones who decide about innovation in a company. With strong leadership from the in-house innovation manager or an external partner such as LEAD Innovation, decision-making processes can be accelerated and everyone concentrates on the role they should play.

Professor Eberhard Witte's promoter model offers an efficient starting point for significantly increasing the speed of innovation management. Promoters are people who intensively and actively promote an innovation process and break down barriers in connection with innovation processes in the company. A distinction is made between different types of promoters:

  • The power promoter is located at a high hierarchical level and has the task of convincing the innovation project, removing barriers and making the necessary resources available. It therefore has an important role to play in ensuring that innovations can be developed in both the technology and market sectors.
  • The specialist promoter contributes the necessary specialist knowledge and drives the innovation process forward with his know-how (e.g. marketing/sales, R&D).
  • The process promoter establishes contacts and connections between the power and specialist promoters, but also with persons outside the company (innovation managers).

promotorenmodell-geschwindigkeit-innovationsmanagement

 

Conclusion: Speed in innovation management

In summary, it can be said that democratized decision-making processes and strong hierarchies in silo organizations often lead to those who develop an innovation not working together. This makes companies very slow and reduces the speed of the innovation process. The moderation of the innovation process by an innovation manager and the appointment of promoters promotes the effective cooperation of all stakeholders and makes the development of innovations in large organizations significantly faster.

5 tips for a future fit innovation process

Image source title image: https://pixabay.com/de/photos/raketenstart-rakete-abheben-nasa-67643/

Michael PUTZ

Born in the Salzkammergut. After working for Shell and Porsche, he concentrated on innovation management as a study assistant at the Innovation Department of the Vienna University of Economics and Business Administration. In 2003 he founded LEAD Innovation and manages the company as Managing Partner. Lectures at MIT, in front of companies like Google or NASA.

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