Innovations FOR SUCCESS | Jerzy Kalinowski | KPMG | PL

Innovations FOR SUCCESS | Jerzy Kalinowski

Innovations FOR SUCCESS | Jerzy Kalinowski

In order to succeed on the dynamically changing market, every company needs to look continously for new, innovative ideas. Only multiple, coordinated actions can make it possible to introduce pro-innovation culture into dna of the organization.

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Partner, Head of Technology, Media and Telecommunications in Poland and CEE

KPMG in Poland

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Digital technologies are key driver of innovation – according to Business Insider from May 29, 2015, about 52% of all patents in 2014 were related to the ICT sector. However, also other industries, including aviation, automotive, energy or even FMCG are the subject of the digital changes.

Creation of innovative solutions, their development and implementation, can be realized by a company in different business and operating models (such as those presented in Figure No. 1). Many enterprises naturally prefer a model where they create innovative concepts and manage from the beginning to the end the complete innovation cycle on their own. However, in practice, even the leading ”innovators” acquire creative solutions at very different stages of their development (starting from concepts, up to the purchase of innovative solutions/products or licenses) from many different sources.

THE WAY TO INNOVATION IN AN ENTERPRISE
KPMG’s experience shows that market success of most companies recognized as “innovators” is based on 4 key elements:
4. ORGANIZATION OF PRO-INNOVATIVE CULTURE
3. STRUCTURAL SYSTEM OF INNOVATION MANAGEMENT
2. SYSTEM FOR ACQUIRING INNOVATION
1. INNOVATION STRATEGY

1. Innovation strategy provides an answer to the question on what business goals are to be achieved thanks to innovations. The strategy also defines the financial resources that are allocated for the acquisition, development and implementation of innovations. One of its important elements is also an identification of what kind of innovations are required (e.g. what kind of products, technologies, solutions or improvements of which business processes). From the enterprise’s point of view, it is also necessary to determine which innovations should be found outside the organization, taking into account the objective assessment of the internal innovation potential (primarily the competence of the people and experience in the field of innovation).

2. When acquiring innovations, enterprises apply various models:

  • purchase of innovation (products, solutions, licences, etc.) from an external provider,
  • internal innovations, i.e. creation of innovations from scratch inside an organization,
  • internal incubation of innovation, to create a special environment and infrastructure (of the incubator) within the organization, in which innovative ideas are created and developed,
  • cooperation with external partners (e.g. R&D centres, external incubators, etc.) to jointly create and develop innovative solutions,
  • innovation “crowdsourcing” to look for innovative ideas and solutions among the virtually created community (it can include both the organization’s employees and external parties),
  • creation of own dedicated corporate venture capital (CVC), as a special investment vehicle in developing companies creating or having innovative solutions,
  • financing Venture Capital (VC) type external fund, which invests into companies creating or having innovative solutions.

In such case, an enterprise usually provides financing based on rules under which other investors participate in the fund; in this case implementation of innovations built by VC portfolio companies within the framework of the enterprise takes place in a strictly commercial way. In case of large organizations, acquiring innovation is achieved through a combination of different models. External sources of innovation are becoming increasingly important in the current pace of the technology development, and therefore the role of innovation scouting conducted by dedicated specialists and various strategic partnerships has become considerably more significant.

3. Innovation management system in an enterprise enables efficient acquisition, development and implementation of innovations. Such system consists of the following components:

  • selection mechanisms of innovative projects aligned with the strategy of innovation,
  • system for the acquisition and development of people “innovator” DNA,
  • business processes and procedures for managing processes associated with acquisition, development, innovation implementation and risk management,
  • organizational structure and a team of people dedicated to the supervision of the implementation of innovation management,
  • dedicated controlling system (financial and business) for innovative projects,
  • KPI system (Key Performance Indicators) and reporting for monitoring the effectiveness of innovation management.

4. Even the best system of innovation management does not bring the expected results, if the enterprise does not implement the appropriate pro-innovative culture.
Information:
Factors unfavourable to innovation: The typical culture of a large organization is the main barrier for innovation. Typically large organizations have a hierarchical structure, which extends the time of decision-making, base all operation on stranardized, very formalized procedures, and focused in a natural way on risk management.

PRO-INNOVATIVE CULTURE AND ORGANIZATIONAL CULTURE OF BIG ENTERPRISES
Enterprises should devote much more attention to design and implementation of a long-term program
of cultural transformation focused on pro-innovation. Activities such as the organization of innovation
workshops are only short-term initiatives. The aim of such a transformation program is to create an internal
culture of entrepreneurship, stimulating creative thinking and independent decision making, combined with acceptance of the risk inherent for innovation.

Such program may include the following components:

  • pro-innovative incentive system,
  • system of innovation-oriented values,
  • development programs to improve the competences necessary for the development of innovation,
  • establishing “innovators” working groups,
  • system of sharing knowledge and best practices in the scope of acquisition, development and implementation of innovations,
  • promotion pro- innovation activities.

Creative ideas enable the enterprise to create products and services which are competitive on the market, improve technological processes, make use of new materials, and improve the efficiency of business processes or the operation of the organization. On the global market, success is achieved mainly by the enterprises that have built the strategy of innovation, have created an effective system of attracting creative ideas and solutions, have implemented a structured approach to managing and are building a culture of innovation.

Information:
For several years the capital market has been “rewarding” innovative companies, determining their value much above the market value resulting from cash flow. For example, in the case of Tesla company, occupying first place in the ranking of Forbes’ List of the “World’s 100 Most Innovative Companies” in August 2015, innovative bonus has been estimated at up to 85% of the value of the enterprise. Being an „innovator” also brings a different kind of benefit - consumers are more willing to buy products and services from them, many journalists prefer to write about them, and additionally they become a more attractive employer for the best and brightest professionals.
 

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