The benefits of in-house innovation
Between 2018 and 2020, 45% of UK businesses actively engaged in innovation compared to 38% in 2016-2018. A necessary shift in an increasingly competitive marketplace that is defined by fast-paced developments, customer fickleness and impending socio-economic challenges.
Many organisations begin their innovation journeys by outsourcing wholesale to large-scale agencies. While outsourcing is a safety net for established companies with legacy structures, technologies and processes, it shouldn’t be the long-term choice for future-focused leaders. Bringing external support for large transformational projects where specialist knowledge and a short-term team are required can help kickstart the process. However, innovation can only be leveraged as a competitive advantage when embedded within the business structure.
In-house innovation enables the utilisation of existing company knowledge, full implementation of changes and innovation refinement to achieve positive outcomes. Internally-led innovation has evolved from traditional R&D departments to innovation labs – fully autonomous business units dedicated to keeping the business at the forefront of its industry and ahead of challenges. The benefits far outweigh the initial investment of time and resources.
So what are the benefits of developing in-house innovation capabilities, and how can companies leverage it for maximum impact?
Why build innovation capability in-house?
Building innovation capability in-house isn’t just cost-effective. It has wide-ranging benefits for the whole organisation; the main ones are summarised in the following three elements.
Leverage existing knowledge
Employees harbour a wealth of knowledge because they are immersed in the business’s key activities as part of their day to day. Any gaps and missed opportunities are apparent to them because they know the company niche, industry and target market well. This is invaluable to idea generation, validation and implementation because a deep understanding of how the products or services work and how they are received is essential to successful innovation.
While an external agency can help extract these insights from the workforce when leading transformational projects and offer a fresh perspective, this benefit stops when the transformation project stops and the agency leaves. This is why it is crucial to embed that know-how into how employees think on an ongoing basis - the knowledge bank of employees shouldn’t be overlooked.
Long-term implementation process
External agencies tend to work with companies for a limited period, often before the benefits of innovation are fully realised. The challenge for businesses is that it can take up to 5 years, or longer, to see the total ROI of a change project.
When external agencies leave after the initial implementation, and without effective knowledge transfer, they leave an execution gap. Effective knowledge transfer puts the existing workforce in charge of fully integrating those innovation projects into operations and ensuring they are fully implemented for the company’s benefit.
This can be achieved through a dedicated in-house innovation team. Equipped with the capabilities, processes and authorities, this team’s role extends beyond the execution of the particular transformation project. Dedicated in-house innovation labs not only lead incremental improvement projects but also drive the diversification of products and services through design thinking.
Even the best-made plans are rarely perfect. With the fast pace of change, many projects meant to future-proof a company can quickly become outdated.
That means that while innovation may be implemented according to plan, companies must be agile and allow constant refinements to achieve success. And this realignment is best managed by an internal team that has its hand on the company’s pulse, understands what’s going on within the industry, and can harness the value of influential trends.
Agencies initiate and set the impetus for change. Internal teams execute, refine and finalise.
So, how do you execute in-house innovation successfully?
How to garner results from in-house innovation
Innovation is a highly coveted but challenging business process. There is a risk that setting up an in-house innovation team could become a novelty and only benefit the organisation as a feature they can market. To make in-house innovation a worthwhile investment, it needs a clearly defined strategy for idea generation and execution.
Consider the following questions when developing an internal unit of innovation:
- What’s the goal?
Without a purpose, any team will struggle to produce meaningful outcomes.
- How will creativity be cultivated?
Help participants think outside the box despite working internally in the company.
- How will participants be rewarded for their extra input?
If members of the innovation team see it as a burden, their creativity will be limited. Create opportunities for contributions and buy-in, such as crowdsourcing ideas.
- What happens to validated ideas?
There should be ideation, validation and development processes to ensure changes are implemented.
- How will you maintain customer-centricity?
Ultimately, customers decide whether an innovation is successful, so their needs, priorities and preferences should be highlighted.
- What are the metrics of success - financial and otherwise?
Without specific KPIs, a department’s success is immeasurable. Data such as customer satisfaction should be carefully monitored.
- Who will make up the innovation team bringing knowledge, understanding and disruption?
A lean team that leverages input from the wider business adds a more significant benefit.
- How will you break the resistance to change and get other departments on board?
Upskilling, motivating and rewarding employees to add value reduces the friction of change.
Innovation is a must-have element of any successful business. Moving away from traditional R&D departments and agencies can produce results that accelerate the growth of a business exponentially. In-house innovation, whether described as a lab, hub or team, drives the business forward when executed correctly. Where could in-house innovation take your business?