Consumer

After a difficult period of downsizing, restructuring and consolidation in recent years, organic growth through innovation has emerged as a key competitive advantage for firms in the consumer industry. Many companies have increased expenditure on R&D as a result, but few are happy with the return on their investment. Who leads innovation, what competencies characterise a top innovation leader and how should an organisation evaluate such people? These are just some of the issues discussed in a recent survey of senior executives from leading consumer related companies worldwide, including P&G, PepsiCo, J&J, Unilever, Wrigley, conducted by the global Consumer practice group of Egon Zehnder International.

What is innovation?

All survey participants agree that innovation means more than generating a new idea – it means converting creative ideas into consumer solutions that drive business value and can cover products, processes, people, marketing, technology and organization. The past decade has seen major improvements in terms of time-to-market, gathering consumer feedback, tailoring products accordingly and support from the top. Yet two main stumbling blocks to innovation remain: slow progress from idea generation to initial sales and inadequate financial support in the execution phase. To foster innovation, firms need to accept that failures are necessary, create a corporate culture that fosters innovation, ensure top-down support and get the right people on board.

Innovation can be divided into different categories:

• Incremental innovation includes line-extensions, product updates and “base-line maintenance.”
• Significant innovation adds a whole new dimension to products or services and often requires new technology and/or new production methods.
• Transformational innovation can change an entire industry and often includes out-of-the box ideas and revolutionary, daring creativity.

So what are the major roadblocks that prevent consumer companies from being more successful as far as innovation is concerned?

• People: as long as a need for change is not perceived in an organization, it is more difficult to motivate people to share and develop new ideas.
• Finance: many companies don’t seek transformational innovations for financial reasons. In the beginning most significant innovations seem financially weak ideas, so innovation teams need protection from the top.
• Alignments: R&D and commercial activities need to be aligned AND innovation teams should be linked to consumers.
• Benchmarking: the most problematic aspect of innovation is measuring the performance improvements that it generates.

Paradoxically, our survey reveals that managing innovation means letting go of the reins a little. While some supervision and controlling of the innovation process is necessary, a high level of empowerment, trust and independence is crucial to success. In a truly innovative environment, top management will not have ‘everything under control’ all of the time, because innovation cannot flourish in a culture where people constantly have to obtain permission to take action. Companies therefore need to promote a culture where risk-taking is encouraged rather than punished.

Firms nevertheless often find it difficult to get their best people into innovation functions for a 3-4 year period, as other functions like marketing often hold greater appeal. One way of overcoming this problem is to agree to standard performance measures in innovation and to reward milestone achievements with material incentives. However, building a strong R&D team is naturally a top-down process that depends heavily on recruiting the right leader. So what makes a top innovation leader?

Key competencies for Chief Innovation Officers

The role of Chief Innovation Officer is a business function that relies on close customer contact and requires full and unconditional CEO support. Successful candidates often combine a scientific background with management training/experience and skills in marketing or other line functions. According to our survey results, top innovation leaders also demonstrate the following 6 representative key competencies:

• Market insight: an understanding of key business drivers, current issues and expected trends
• Results-orientation: a track record of meeting and exceeding goals, even under tough conditions
• Change management: ability to drive step-by-step changes that improve quality, efficiency and output
• Organisation leadership: ability to build and motivate talented inter-functional teams that consistently deliver strong results
• Strategic-thinking: ability to think out-of-the-box and develop a vision
• Collaboration and influencing skills: a track record of forging productive partnerships and alliances with internal and external stakeholders.

Another key quality of top innovation leaders is Emotional Intelligence (“EQ”). Innovation leaders can only achieve significant results in a corporate culture that enables failures, fosters change, rewards creativity with formal incentives to innovate and protects those who move outside their comfort zone.

How can firms recognise potential innovation leaders inside their own organisation?

While pure innovators often exhibit a dominant achievement motive and senior executives are typically characterised by a stronger power/influence motive, top innovation leaders need a balance of both. They tend to be unconventional thinkers who are often to be found on the fringes of an organisation, rather than in the mainstream.

Whatever the title and scope of their responsibilities, innovation leaders need to remember that they hold a business function and remain close to consumers. The role calls for relentless change-agents, who are expert at dealing with pressure and uncertainty. People management is another core competency for executive innovators. Above all, however, their success depends on the full and unconditional support of the CEO.