Leadership and Innovation, Why Does It Matter?

There is no doubt that a company which has a visionary, or innovative leader is more likely to fulfil its innovation dreams than one which does not. Furthermore, a leader too concerned with innovation is likely to result in a rudderless company. So what is the ideal situation? Why does it matter?

We believe that a leader needs to support and nurture innovation, lead by example. It is not enough just to talk about innovation, actions are required to demonstrate such a commitment. You need to be consistent in your approaches, you cannot switch resources between core activities and innovation on a whim. You need to have appropriate resources in place to manage both activities, recognising their differences. What works for managing core activities, are unlikely to work managing innovation.

Why does it matter? Research has shown that organisations see innovation as a top-three business priority. Recognising this, they accept that senior management must be involved, although, as data from the following surveys indicates, to a lesser degree than one might expect.

A 2007 McKinsey report, “How Companies Approach Innovation” considered innovation and leadership as part of the survey. When questioned as to the ‘types of innovation decisions made by leadership teams’, the responses were as follows:

· ‘We determine where to focus innovation efforts’ – 64%;

· ‘We make commercialization decisions’ – 52%;

· ‘We decide who will work on innovation projects’ – 50%;

· ‘We make go/no-go decisions, release funding at various points during innovation process’ – 47%;

· ‘We define themes, topics for exploration to develop breakthrough ideas’ – 42%;

· ‘We make decisions on mergers and acquisitions’ – 28%;

· ‘We set innovation budgets’ – 24%;

· ‘We set innovation performance metrics, targets’ – 22%.

Of equal interest, the survey also considered ‘ways in which innovation is governed in your organisation’. 36% of top managers reported that it was discussed ‘as necessary among the senior leadership team’. 34% reported that it was part of the regular agenda of the senior management team. Of real surprise, only 10% reported that it was through an ‘innovation council or innovation leadership team’.

Having accepted that innovation is a top management ‘job’, it is disappointing to note the response from the following BCG survey that only just over one-quarter of CEOs drive innovation.

The research conducted by The Boston Consulting Group, “Innovation 2010 A Return to Prominence – and the Emergence of a New World Order” questioned who is ‘the biggest force driving innovation at your company? Unsurprisingly, the top answer was the Chief executive officer, with 28% of responses. The surprise was the number – less than one-third of organisations noted that innovation is driven by the CEO! The same report also considered obstacles to ‘generating a return on your investments in innovation’ and it is interesting to note that ‘insufficient support from leadership and management’ was only cited by 20%, the tenth highest answer.

Research undertaken by McKinsey entitled “Innovation and Commercialisation 2010” noted that 27% of respondents reported that ‘gaining leadership alignment’ was a ‘significant leadership and organisational challenge’ faced by companies. Other answers to the same question included ‘aligning human and financial resources’ 35%; ‘overcoming internal corporate politics’ 30%; and ‘lack of a formalised process’ 29%.

Again, this McKinsey research demonstrates that leadership alignment is critical to the innovation process. So what? Future posts will consider leadership and innovation in more detail, and in particular how to inspire the organisation in its innovation efforts.

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