04 Feb What Is Innovation Consulting?
By Dave Breda
Innovation is a predictable annual priority on the agendas of most CEOs. Given its potential impact on a business, this prioritization is understandable and warranted. Yet with all the focus on innovation, significant uncertainty can surround the innovation process. In any industry and within any company, uncertainty can signal the need for outside perspective, expertise, and direction – in this case, innovation consulting. Here we’ll explore both innovation and innovation consulting with the goal of helping you profitably push the innovation accelerator.
Innovation: What does it mean, where does it come from, and how do we do more of it without turning our company upside down?
Innovation should be defined uniquely by every business, but the core concept can be thought of as the generation of new ideas for products, services, supply chains, and business models as well as the implementation of those ideas. At Accel Management Group, we are often asked to kick start idea pipelines when companies find that existing ones have become stale or overly populated with derivatives or extensions of existing products. Companies may also realize that they have become too dependent on one successful product platform and that, too, may trigger a realization that fresh ideas are needed.
A common misconception is that upping your innovation game entails dramatic organizational restructuring. Yet innovations big and small can be created with only minimal disruption to a company’s day to day operations. Focus on creating pathways and a “clearinghouse” within existing structures where ideas can be freely created, exchanged, collected, evaluated, prioritized, and developed. You can become a disruptor without being overly disrupted!
Another faulty assumption is that new ideas must originate internally. Successful innovators broaden their idea horizons beyond employees and are alert to input from sources throughout their company ecosystems, both upstream and downstream. The stimulation of creativity, whether it comes from employees, suppliers, customers, or partners, is a key ingredient to successful innovation. But it’s not the only one. Far more difficult? Turning ideas into solutions – not just products – that successfully address specific customer needs.
How do you know when your innovation efforts are succeeding? Given Accel Management Group’s focus on generating measurable results, we look at an organization’s ability to impact revenue through innovation. The most direct way to measure this connection is through what we term new product revenues – the percentage of total revenue generated by products or services that have been in the market for two years or less. We’ve benchmarked companies as high as 50% and, on the other end of the spectrum, at less than 10%. This is a significant variance in innovation capability and output. New product revenues are the lifeblood of a company, particularly those in the tech industry, so paying attention to and maximizing this measure is essential for profitability and robust growth.
An experienced innovation consultant can help you create a plan to increase new product revenues, beginning with an objective evaluation of the completeness and quality of your product strategy (or strategies if you serve multiple customer segments). Product strategy is one of the most direct ways to impact innovation output, but innovation consultants can help in other areas, too. Business models, technology management, platform strategy, the ideation phase of product development (the “fuzzy front end”), organization design, roles and responsibilities structure, and the incubator function – all can affect company revenues, and all represent different dimensions of innovation output with elements that can be measured (development mix, wasted development spend, marketplace renewal, technology leverage, commercialization success, reuse, etc.).
How to Choose the Right Innovation Consultant
Consulting firms abound, and nearly all will claim some level of innovation expertise. Evaluating the depth of this expertise can be challenging. We advise interviewing the consultant(s) who will be directly assigned to your project (not just the firm in general) and asking some tough questions:
- Does the candidate have relevant, practical knowledge based on implementation experience?
- Can the candidate point to measurable results and reference accounts?
- Does the candidate offer insights through innovation benchmarks or other comparative industry data? How does the candidate propose to measure baseline performance and improvements?
- Can the candidate hit the ground running with proven innovation frameworks?
- Is the candidate a senior member of the firm?
You’ve Chosen an Innovation Consultant. Now What?
To get started, a consulting firm will likely want to conduct an innovation assessment which can last 3-6 weeks. The main purpose of this assessment is to identify baseline performance and conduct a gap analysis of the “as-is” and “to-be” states. During this phase, consultants will conduct a series of interviews, hold working sessions with leadership and key contributors, review current practices and innovation output, develop findings and recommendations, and create a high-level implementation plan.
Solution design should be fact-based with recommendations supported by quantitative industry benchmarking data collected during the assessment phase. At the assessment’s conclusion, consultants will normally conduct a full readout with the client and help drive consensus on a plan forward to improve innovation output. From that point, the project transitions to the implementation phase where consultants provide tools, practices and process, organization design support, metrics, and specific skills coaching to ensure clients achieve measurable results.
Moving Beyond the Uncertainty of Innovation
Given the lack of clarity around innovation, it’s no surprise that so many companies struggle with innovation output and lack the basic innovation practices that highly successful tech industry leaders have employed for decades. These leaders experience an almost 20% higher gross margin than average performers and much higher revenue growth as measured by new product revenues. If you aren’t keeping pace, consider an innovation consultant to help you clarify goals and build effective innovation strategies that can drive profitability and growth without unnecessary disruption.
About the Author
Dave Breda has more than 25 years of experience creating client improvements in technology-based and time-critical companies. Through consulting and interim management roles, his accomplishments include dramatic performance impacts in product development and operations resulting in critically recovered projects, highly efficient product pipelines, and fully ingrained best-in-class practices. Mr. Breda earned his MBA degree from the Darden School at the University of Virginia and his engineering degree at the University of Colorado, Boulder.