The average number of years a company spends on the Fortune 500 list is dropping.
Fifty years ago, a company on the Fortune 500 list could expect to stay there for 33 years, but by 1990, that tenure had shrunk to 20 years. By the year 2026, forecasters expect that the average length of time spent on the Fortune 500 will be 14 years.
Those figures indicate increased volatility, but they also indicate that innovation is behind the churn. The fact is that companies that don’t continuously innovate risk irrelevance because innovation is going to happen, whether major corporations participate or not.
Lack of great ideas is not the problem when it comes to innovation; management of innovation is. Anyone can come up with great ideas, but success is increasingly defined by the ability to deliver on those great ideas, and for that to happen, strong innovation management is mandatory.
Matching Great Ideas to Influential Resources
A shared space for ideas, whether that’s in the form of an Innovation Department or a company-wide system for sharing and developing innovative ideas, is essential for translating ideas into action. Most companies look to their employees for innovations, though an increasing number of them also look to customers, partners, and the general public.
Companies that succeed at innovation have strong innovation management systems that match good ideas with the decision-makers who can make them happen. This is possible even in companies without dedicated budgets for idea implementation, because the right decision-makers can redirect institutional resources toward outstanding ideas. However, getting those best ideas to decision-makers requires a deliberate system for innovation management.
Core, Adjacent, and Transformational Innovations
How companies balance their “innovation portfolios” is also important. Innovations to core processes tend to be less risky, but have lower ROI. Innovations in core-adjacent initiatives may be riskier, but they tend to have a higher ROI. Riskiest of all are transformational innovation activities, but when they pay off, their ROI is highest of all.
From 2012 through 2017, companies started devoting less innovation management resources to core innovations, and more to core-adjacent and transformational innovations. In other words, businesses are realizing the importance of innovation and are more willing to put resources behind innovations that may not have seen the light of day in earlier, less fast-paced eras.
Measurement and Reporting Creates a Virtuous Cycle
There are many best practices for getting value from innovation, and strong innovation management is at the heart of them. It’s typical for 25% or less of ideas submitted to an innovation challenge to be fully implemented. For that to happen, an innovation management system that manages idea evaluation, matching ideas to appropriate personnel, and finding resources to implement them is necessary.
Furthermore, for innovation to become an integral part of business, it is absolutely necessary to measure and report on innovation initiatives. This may involve development of new KPIs, determining the right way to measure innovation program success, and ensuring that innovation initiatives don’t stagnate.
Companies that reap the rewards of innovation are consistently those that measure and report on the outcomes of their innovation programs. Doing this creates a virtuous cycle of creating a strong business case for innovation, learning lessons from past initiatives, and getting the necessary buy-in for continued innovation.
Want to learn more? We encourage you to download the IdeaScale 2019 State of Crowdsourced Innovation Report for a deeper dive into the topic of innovation management that gets results. We also invite you to get our Innovation Starter Kit. There is no time like the present. Learn how to manage innovation to stay on the leading edge of your industry.