THE REINVENTION OF INNOVATION

In a business world shaped by digital transformation and changing at an ever-faster pace, innovation is more important than ever. As a management task, it is ideally a structured and goaloriented process – and only in rare cases the groundbreaking idea of a brilliant visionary. But what constitutes successful innovation management?

“The Roots of Innovation” by data visualisation artist Dr Kirell Benzi depicts the relationship between innovation and research.

You need to ask Linda A. Hill if you want to know what makes companies like Google, Volkswagen, IBM or Pixar so innovative. A professor at Harvard Business School, she and her team have spent more than a decade interviewing executives from these and many other successful companies.

Harvard Business School is one of the most prestigious universities in the world

Their goal: to find out what management methods, strategies and processes companies use to develop innovative products and services time and again. One might think, considers the Harvard researcher, that the key to innovation lies in attracting exceptionally creative talent, making the right investments or breaking down organisational silos within companies. But Hill’s research reveals: while all these measures can certainly be helpful, successful innovation is one thing above all – a question of professional innovation management.
 

According to a 2019 study by the Bertelsmann Stiftung, innovations in Germany have been actively driven by many companies. Around 1,000 companies were surveyed, which were divided into seven innovative milieus.

The study also showed that in addition to technology leaders and innovative companies, around a quarter of the firms have not yet purposefully driven innovation forward.

Still, innovation management is now established as a specific job profile in more and more companies: innovation experts coordinate all activities relating to the new and further development of products, processes, corporate culture and business models. They bring together experts from research and development, marketing, controlling and sales and ensure that new ideas can also find their way into the company from outside. This is how real innovations with value added are created. The innovativeness of companies can be planned, controlled and systematically promoted – a management task that is exceedingly demanding.

“Companies should be willing to question their processes, culture and organisation.”

Prof. Gunther Friedl, Dean of the School of Management at TUM

Perhaps the most important task of innovation managers is “to counter rigid structures and too much self-assurance at all levels. And ensure that the company remains agile,” explains Prof. Gunther Friedl, Dean of the School of Management at the Technical University of Munich (TUM). Among other things, Friedl focuses on the question of how the innovative strength and performance of companies can be measured and controlled. “Crucial to the innovative strength of companies is the awareness that they must constantly review and reassess what they already have.” In order to survive in the digitalised business world, you need more than innovative products and services: “Companies should always be willing to question and remodel their own processes, culture and organisation as well.” This means that innovation management itself must also be open to change.
 

But what can it look like in concrete terms, the continued development of innovation management in the disruptive digital age? A number of trends are emerging among SMEs and corporations across all industries.

Trend No. 1: Innovation labs and agile innovation processes establishing themselves

Many companies want to expand outside of their core business and open up to new, digital business models and partnerships with start-ups, with scientists or with companies from other industries. At the same time, they mustn’t jeopardise business units that are operating successfully. In companies across all industries, innovation labs, aka innovation hubs, have established themselves in recent years as an effective instrument for driving innovation. Unlike conventional R&D departments, they are in most cases structurally separate from the core organisation. As experimental playgrounds, they offer a space for unusual, sometimes even initially absurd ideas.

Merck’s Innovation Center in Darmstadt brings together people, technologies and competencies from different disciplines

In the protected space of an innovation lab, employees can try out and implement new ideas: they can trial agile working methods, get to know innovation tools in practice. They work on feasibility analyses and on implementing pilot projects, or they create what are called “minimal viable products” (MVPs), that is, products the innovation teams use to gather user feedback as quickly as possible in trial operation. Finally, they transfer the knowledge and ideas they have gained in this way back to the core organisation.

Case 01: BMW
Open to change

Innovation is a tradition at the BMW Group. Knut Mayser has worked for the car manufacturer for 30 years and is now Head of Innovation Management. He explains: “The carmaker’s self-perception has changed radically in recent years – and with it BMW’s approach to how new products are being developed.”
 

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Trend No. 2: Digital support for innovation management

Digitalisation remains a key driver of innovation. It therefore makes sense to also digitalise the innovation process itself and make it more transparent and efficient. A first step here can be to install special innovation management software and knowledge management platforms in the company through which the entire innovation process runs: from further development of the innovation strategy to concrete brainstorming, conceptual design and prototyping to implementation and performance measurement.

In future, companies will also be able to rely more and more on support from artificial intelligence in the innovation process. One example of what this can already look like in practice is provided by Dr Antonino Ardilio and his team, who are conducting research into innovation systems at the Fraunhofer Institute for Industrial Engineering (IAO).

State-of-the-art software systematises the innovation process and makes results measurable

“One of the challenges in innovation management is that it is becoming increasingly impossible to keep track of all relevant new technological developments, research findings and changes,” Ardilio reports.


The number of scientific documents alone doubles every nine years, he says. “No matter how many experts, researchers and developers I hire, individual humans can’t keep up in the long run.” For this reason, Ardilio and his team are using artificial intelligence to identify relevant data and information and to link them with each other. “We’ve developed and trained algorithms that automatically trawl through scientific papers, studies, patents and knowledge networks to identify relevant new ideas and research findings.”

A practical example: the researchers worked with a company that makes seamless gas cylinders made from metal that divers use for their oxygen supply. A small niche market with little growth potential. So the company was looking for new markets for its products. Ardilio and his team put their artificial intelligence to work looking for alternative uses for these seamless metal cylinders. And the algorithm came up with something: it found that seamless pipes or shafts are required by many industrial enterprises. They are used, for example, for drive shafts that transmit the torque produced by engines. By adopting the technology used for these scuba tanks, these shafts could be produced more easily and cheaply than with previously common processes. “Today, the company sells more parts for drive shafts than scuba tanks,” Ardilio proudly reports.
 

The researchers are convinced that a similar template can be employed to apply artificial intelligence at many points in the innovation process. Algorithms can also be trained to optimise innovation management itself: “For example, you can have the algorithm evaluate where the bottlenecks are in existing innovation processes where new ideas get stuck,” Ardilio explains.

Case 02: EnBW
Incubator for new business ideas

With 24,000 employees and 5.5 million customers, EnBW Energie Baden-Württemberg AG is one of Germany’s largest energy companies. Its EnBW Innovation division has already received multiple awards. 2022 saw the company take first place in the “Venture Building” category of the Digital Lab Award by German business magazine “Capital”.
 

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Trend No. 3: Innovation networks

Science is largely founded on exchange and collaboration. Discoveries or inventions almost always build on prior findings by researchers or developers.

It’s along these same lines that companies continue to develop software, for example: they open their source codes for what’s known as “open-source development”, so that everyone can use and develop them freely. The intention is that the ideas and abilities of many help each individual to progress further than they could otherwise manage on their own.

But beyond the area of software development, too, innovation is increasingly becoming a team effort. As a rule, innovation today is the result of collaboration between different business units, with the involvement of customers and external companies.

long as possible and quickly protecting them with patents, the trend is toward greater transparency. “We’re not talking here about being naively open – it’s about opening up in very specific areas that are important to innovation,” says TUM expert Friedl. However, this “open innovation” means a major cultural change for many companies. “One big benefit is that you often don’t realise your own comparative advantages and strengths until you start collaborating with others.” You can then take this insight to continue developing your own offering inhouse.

Case 03: Open Industry 4.0 Alliance
Innovative in the network

Industrial companies and IT service providers have joined forces in the Open Industry 4.0 Alliance to bring about the Industrial Internet of Things (IIoT) and to work together on to the digital factory.

 

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0Trend No. 4: More sustainability in the innovation process

Most companies today are focusing on the economic, social and environmental sustainability of their actions – because consumers, as well as employees, want clarity about a company’s “purpose”, that is, its values and goals. “The pressure to meet climate targets, for example, is very high across all industries. The issues of sustainability and social responsibility have top priority at C-suite level,” says TUM innovation expert Friedl.

According to estimates by the German Environment Agency, more than 80 per cent of a product’s environmental impact is already determined in the design phase. It is therefore crucial to incorporate sustainability criteria such as a product’s carbon footprint, social standards in the supply chains, and energy and water consumption in the manufacturing process as early as possible into the innovation process.

A 2019 study by the Fraunhofer Group for Innovation Research and Pforzheim University reveals that more than half of the companies surveyed have already adopted specific sustainability goals into their innovation strategy. For example, they are working on innovative processes that help to make their own production more climate-friendly. But sustainability criteria also play a role in product innovations: for example, more and more companies are taking into account the environmental life cycle assessment of new products or ensuring that they are recyclable.

The diversity and complexity of current innovation trends show that successful companies see innovation as a holistic challenge. It’s not just a matter of driving forward individual innovative projects, but of shaping and managing an entire innovation ecosystem. This is how innovation works today.

Interview:
“Innovation often has more to do with discipline and control than creativity”

Stefan Thomke is an innovation researcher at Harvard Business School. In this interview, he explains why innovative companies need to develop a culture of experimentation. His call to innovation managers: “Act like a scientist!”
 

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Statement:
How is the development of innovations changing as a result of digital transformation and what does this mean for companies?

Dr. Ali Aslan Gümüsay … holds a doctorate from the University of Oxford. He is Head of the Innovation, Entrepreneurship & Society Research Group at the Humboldt Institute for Internet and Society (HIIG), Research Fellow at Judge Business School, University of Cambridge, and ran the “Grand Challenges & New Forms of Organizing” network of the German Research Foundation (DFG).
 

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Image sources: Image 1: Kirell Benzi, Image 2: Susan Young for Harvard Business School, Image 3: Merck KGaA, Image 4: Andrey Popov

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