A few weeks ago, we may have given you a bit of a surprise. In a previous blog, we talked about the need for innovation to be governed more, not less. Our research has shown that companies governing innovation with discipline are growing more rapidly than their peers who follow a more haphazard approach.
In our experience, many companies assume governance will stifle ingenuity. To some, the idea of having checks and balances doesn’t really foster creative thinking—too restrictive, too controlling, perhaps? But our research reveals the opposite: the right type of governance can, in fact, create the right conditions to turn innovation investments into growth.
It is hardly front-page news that many large organizations realize they need to innovate to keep up with the increasing pace of disruption. We found that companies across the globe expect to increase investments by 1.8x in the next five years. They want to further boost their innovation initiatives, ranging from research and development to advanced technologies, to mergers and acquisitions.
But, while many companies are not shy when it comes to expanding their budgets, most struggle to turn these innovation investments into growth. Why? It turns out that a vast majority of companies do not govern innovation with the right levels of discipline.
The good news is that large companies are waking up to the reality that governance is not the enemy, but an enabler of innovation.
Twelve governance rituals
As mentioned in an earlier post, our research shows that disciplined governance can help the right types of innovations to thrive in the right businesses. Through our work across many industries, as well as through research and innovation expert interviews, we identified 12 key rituals to effectively govern innovation investments:
In a survey of 1,090 companies across 11 industries and 15 geographies, we discovered that only 12 percent of them adopt six or more of these rituals today; an approach which we describe as “extensive innovation governance.” And remarkably, these companies are achieving double the revenue growth of companies using fewer governance rituals.
Govern more not less
Companies that commit to governing innovation more extensively in the future will be in a great position to improve performance at the portfolio level. But only if they can create the right conditions for the best ideas to be identified, tested, and turned into commercial reality in the right businesses.
Take BMW as a case in point. The company has moved from generating a high volume of ideas to bringing market-leading ideas to fruition. It is actively engaging with partners to get access to the required technologies, and using specialized in-house capabilities, such as an innovation lab.
BMW has concentrated its expertise in driver assistance and autonomous driving know-how at the new Autonomous Driving Campus, near Munich. The campus provides space for 1,800 experts from various disciplines to work together based on “agile” product development structures. These structures aid the cross-pollination of ideas, easier communication, greater transparency and shorter decision paths. This also makes development and testing seamless.
On the road towards an autonomous driving future, BMW has also joined forces with other industry and tech partners, including Jaguar Land Rover and Intel.
So, even though bumping up your innovation budget is a necessary step to better performance, it will not be enough. We’d recommend you get better at applying the right governance rituals to turn your innovation efforts into growth.