11 November 2006

10 crucial elements of building an innovative company

10 crucial elements of building an innovative company

By Jim Miller, Executive Vice President, Products and Technologies Organization, Cadence Design Systems

Innovation is a major driver of today’s world economy, enabling the introduction of new products that fuel top-line growth for those companies that are good at generating original and novel ideas. Few industries and sectors have relied on innovation as a key element of growth and business strategies more than technology and electronics companies.
A significant portion of the innovation power driving technology can be attributed to the entrepreneurs who have an idea and pursue the dream of seeing it realized. This highly visible phenomenon may lead some people to think that innovation is the sovereign territory of startups and new ventures. This is simply not true. I have found through my experience at successful startups as well as large, industry-leading public companies that innovation and entrepreneurs can thrive in both environments.
There are several obvious but essential elements of a company’s culture that can promote innovation. These elements are not outside the grasp of any company, regardless of size, but do require continuous efforts to keep the innovation engine working. Because they seem obvious, it is often assumed that they are in place and are therefore often overlooked by management.


1. Champion innovation. Management must identify and empower formal and informal leaders to champion innovation through specific programs and initiatives. Although the CEO remains the key innovation driver in organizations, “innovation champions” keep the efforts visible to the organization. Recently some new roles. such as Google’s chief innovation officer, have emerged in the corporate structure to augment the traditional chief technology officer. Special titles are not required, but clear support for—and expectations of—innovation leaders by the senior management ranks is. This signals that innovation is no longer the domain of technology but a priority strategy for numerous companies, no longer just a technology effort but also a critical business practice.
2. Hire smart people. At the risk of stating the obvious, fill your organization with the most intelligent and experienced employees you can find. This foundation of talent will lead to a multiplying effect as the best and brightest share with and build off each other’s ideas. One of the underappreciated advantages of globalization is that it provides access to the intelligent and highly educated talent available worldwide, much of which is in close proximity to customers, from whom many of the best ideas flow. As these global centers of excellence develop critical mass, they will, in turn, establish their role in the company-wide innovation network.
3. Share ideas, methods and technologies. Create formal opportunities to share information across the organization to build an internal innovation network. Cadence sponsors two internal technology conferences—one in India and one in North America—to allow R&D teams to share technical papers, tutorials and ideas with their peers. The conference proceedings alone represent thousands of hours of innovation. However, the biggest value is the informal networking and exchange that occur during the breaks, dinners, and social activities, all of which foster the building of networks within the organization.
4. Establish an entrepreneurial environment. Ideas can come from anywhere in the organization but need guidance from the leadership team. Give every idea and its “entrepreneur” an objective hearing by the management team. The entrepreneur should then work with a member of the management team to analyze the idea in terms of strategic direction and business opportunities. Well-developed ideas supported by analytical data are designated as “strategic discussions” that are evaluated by the applicable executive team—product line or corporate strategy—for further direction and funding decisions.
5. Make innovation a mission. Once an innovation project is identified, give the innovators the freedom to pursue the project. Larger companies have the financial strength and functional resources to establish incubator projects that relieve the team from day-to-day responsibilities of the business, allowing complete focus on the project goals. Even when an exclusive project is not possible or required, making innovative results part of the measurement of an ongoing program helps drive desirable behaviors.
6. Establish vision and deadlines. Innovation thrives where there is a disciplined approach to quality and commitments. Give people the vision in terms of the “what” and “why,” followed by the “when needed,” to be relevant to the business. My experience bears out a management axiom that most of the measurable results occur in the last 20 percent of the remaining time. The manager of the innovation process can control the pace of innovation through the thoughtful establishment of milestones. The milestone intervals should be set sufficiently wide apart to achieve the next demonstrable step toward the desired result but sufficiently close together to create focus for the team.
7. Measure innovation through metrics. Another axiom is the setting of goals that capture the desired results of the proposed innovation. For example, EDA software innovation has technical performance measures relative to the accuracy of results, computational and elapsed runtime, memory usage, and user productivity and usability. The goals can be set sufficiently high to challenge the team for breakthrough innovation but measured in small calendar increments to demonstrate progress.
8. Offer rewards and recognition. The organization needs to provide incentives and motivations to foster innovation. Reward and recognition programs are essential to spotlight and reinforce behaviors that promote idea sharing; collaboration; teamwork; and, of course, results. For example, instant-reward programs can encourage employees and managers to recognize daily behaviors of colleagues, such as assisting at a critical time in a program or contributing market data that supports an entrepreneur’s strategic discussion preparation. Other elements of such programs can range from cash bonuses for invention disclosures and patent filings to special compensation programs for the most-innovative employees and a significant financial stake in the business success of particular innovations.
9. Leverage the external innovation network. There are numerous resources outside of your company that can provide the catalyst or breakthrough for significant innovations. For example, Cadence leverages ongoing relationships with universities, partners, and customers to extend its innovation network by identifying the need for particular innovations, pooling intellectual talent, and sharing financial costs.
10. Don’t forget the bottom line. In addition to product innovations fueling top-line growth, there are always opportunities in business model innovation and process innovation to influence the bottom line. Business model innovations allow large companies to reach untapped or underserved markets for zero or modest increases in operating costs. Managers and product line executives are also encouraged to identify process and product innovations that improve operational efficiencies. The results of these operational efficiencies can be returned to the corporation for additional profits or reinvested in the strong pipeline of entrepreneurial projects that will generate even more top-line growth.