Organisations typically apply a non-optimal approach to innovation, creating incremental and not breakthrough innovation. This approach is now holding them back. It’s time to embrace the agile approach adopted by software and IT companies but to succeed you need the right team and governance
Business executives have always been under pressure to generate growth, and today’s fast-moving and competitive business environment does not make that any easier. Arthur D Little’s eighth Innovation Excellence Survey revealed that leading companies expect their share of revenue from breakthrough, as opposed to incremental, innovation to double over the next five years.
However, achieving breakthroughs is easier said than done: the survey also found that 88% of business leaders were dissatisfied with their breakthrough innovation performances. They have become increasingly frustrated with the limitations of their current innovation systems on producing significant results.
The underlying issue for these organisations is usually that they are applying a non-optimal innovation approach to realise breakthrough innovation. For the past three decades, most technology-based companies have employed a phased approach (commonly called “waterfall”) to all of their innovation efforts. In fact, they have made significant investments in the design and adoption of these approaches so they would become rigorous and mechanical.
Their fundamental goal has been to minimise variances (ie risk) from a well-understood set of requirements and a detailed plan that are both established at the beginning of a development project. As a result, they have created the perfect environment for incremental innovation, reducing cycle times and improving on-time delivery. Unfortunately, this well-honed model is not conducive to breakthrough innovation, in which requirements are rarely set in stone and uncertainty is not only the norm but a vehicle to explore beyond the usual boundaries.
In the meantime, for the past two decades the information technology and software world has been applying its own, highly dynamic innovation model – the agile approach. For some time agile has been applied almost exclusively to software development, and this has borne fruit: the software industry has consistently produced patents at three times the level of the next-most prolific sectors.
Today, agile approaches are increasingly being deployed alongside phased processes in engineering and R&D functions outside software, with positive results. Our research reveals that companies that have successfully added agile methods to their toolboxes, and tailor their innovation approaches by the type of innovation, perform significantly better than those that stick to single, phased approaches.
Clear roles and responsibilities and the right balance of authority and accountability are important for team success in an agile product development environment. Teams must be nimble and the individual members comfortable with ambiguity and experimentation. In the product development environment, agile teams are multidisciplinary teams of specialists that expand and contract depending on their current focus. This would be different from the skills needed to do a technology-feasibility loop. To support this model, agile product development teams are often put together with part-time or limited-time resources. A very small ‘core’ stays constant, and there is a designated team leader throughout the development cycle.
While governance is not often identified as a key element of agile software development, it is critical within product development. In the agile environment, governance acts less like a go/no-go decision-maker and more like a coach to project teams. Governance also serves to mitigate “organisational antibodies” that try to impede or marginalise breakthrough innovations. Loop reviews done at the end of each loop to assess whether the key question has been addressed are discussions between project teams and their governance, using poster boards, prototypes and other visual aids to facilitate the conversation. To enable this environment, it is important that an agile governance group is comprised of individuals who can foster a culture of experimentation and learning, a sense of urgency and agility, and a passion for helping teams jump over hurdles (versus governance being the hurdle itself).
Insight for the executive
It is increasingly important for companies to deliver breakthrough innovation to their markets. However, the approaches that have been successful at improving innovation delivery over the last 30 years are holding most organisations back. Senior executives in product- and process-technology companies are already championing agile approaches to improve breakthrough innovation performance. Creating a separate path with agile principles tuned for a product development environment has been shown to be an effective approach, with key success factors as follows:
- Use portfolio management to make a deliberate choice on what innovation management process to use for different projects
- Initially introduce agile to help nurture breakthrough innovation concepts during the exploratory part of product development (the front end)
- Give executive leadership and sponsorship to the agile teams
- Bring in experts with experience of agile product development methods to guide the teams and governance introduction of an agile process
- Ensure governance breaks down organisational barriers and takes on more of a coaching than a decision-making role; be open to including experts from outside the organisation; ensure that the organisation is receptive and there are viable commercialisation routes