Innovation brought to life: the 3 key steps
Innovation brought to life: the 3 key steps

Innovation brought to life: the 3 key steps

Here’s how to manage a portfolio of innovation projects, and to pivot with agility to maximize outcomes.

“Genius is one percent inspiration and ninety-nine percent perspiration.” Thomas Edison gave voice to this sentiment back in 1902, and the concept still holds true today.

Insight into the “next big thing” takes you only so far. The trick is turning the best ideas into reality.

Today’s unicorns and more established forward-thinking enterprises have several characteristics in common: They continuously disrupt their legacy or adjacent industries. They have rapid-response strategies to disruptive threats and opportunities. They discern the subtle changes in the market that can herald the next disruption down the road. And they strive to use what they learn to refine their innovation approaches—whether their ventures succeed or fail.

At KPMG, we work to bring our best ideas to life by regularly refining our efforts and rebalancing our portfolio of innovative projects with a focus on three critical areas: how to invest, how to launch and how to learn.

How to invest

Successful companies take a strategic view to determine how much investment is necessary to achieve innovation-fueled growth. Business leaders should ask: Should we seize an opportunity that may not pay off quickly? Or should we focus on improvements that can raise margins immediately?

It’s critical to understand how wide and deep innovation efforts should be. Too much innovation can starve a company’s core strategy, while too little can erode competitive advantage.

What’s more, not all innovation projects are equal in value. Some are defensive, designed to maintain competitiveness. Others are adjacent, created to engage new customers or expand market share. Still others are “new horizons,” targeting untapped channels or transformed business models for long-term growth.

A diverse governance team from across the organization can review these options and consider the enterprise’s risk appetite in making portfolio investment decisions.

How to launch

Once a company decides to pursue an innovation initiative, it has three strategic options that can be pursued individually or in combination:

  • Innovate organically. Build the innovation from the ground up. At companies large and small across most sectors, the rules are being rewritten. Organic innovations as diverse as 3D biometric printing of living tissue, downloadable mobile bank accounts and autonomous vehicles are having an impact within their industries and beyond.
  • Innovate inorganically. Buy the product, service, technology or business model when the company doesn’t have the internal capabilities to execute or where speed is critical to seize the market opportunity. Organizations from banks to pharmaceutical companies are acquiring start-ups that allow them to meet the needs of a more discerning customer.
  • Innovate through an alliance or with a partner. Adopt the expertise, technology or business model of an organization that has complementary capabilities in the specific area of disruptive innovation. Strategic partnerships have become practically a daily occurrence—automobile manufacturers and social networks, hospitals and health plans, and cybersecurity software firms and companies across the commercial landscape, to name just a few.

KPMG’s leadership evaluates these three options each time we consider an innovation investment. When pursuing organic builds, we deploy a rigorous end-to-end process, with formal stage gates at key junctures.

How to learn

There is always the risk that certain innovation initiatives will fail. So, companies should cultivate the agility to learn from innovation efforts and pivot if ideas don’t perform as planned. This approach involves three steps:

  • Create. First and foremost, focus on customer experience and market value. Here, experimentation is key. At KPMG, we employ a “seed” concept with the creation of a business case supported by a small investment before launching into full-scale development efforts.
  • Assess and validate. Assess whether development efforts achieve the minimum viable product, which often involves eliciting independent reviews and diverse perspectives. KPMG involves clients during both the development and experimentation phases to gain real-time insights.
  • Learn and pivot. Continually evaluate whether innovation efforts should be accelerated, reinvented, or discontinued. This is the hardest step in managing an innovation portfolio, due to naturally competing interests and priorities, and it requires extraordinary vision and resolve.

Creativity and ideation are the wellsprings of innovation. But companies must perform the hard work that will allow inspiration to grow into successful new products, services, and businesses. In this way, they can provide real solutions to customers’ needs while successfully leveraging innovation to accelerate their financial growth.