Innovation is the process of turning an idea into a product or service which addresses a certain problem and creates value for the organization and the customer.

Why is Innovation important?

Innovation in general offers tremendous opportunities for economic growth and solving critical problems amongst society such as poverty, global warming, or diseases. Examples of this are demonstrated in the attempts to reduce global CO² emissions, mitigate the climate crisis and develop innovative approaches to meet Sustainable Development Goals (SDGs).

The Innovation Management Guide: Strategies, Tools, & Examples

Innovation management has become a key differentiator for companies aiming to stay competitive in today’s uncertain, boundaryless business world. Whether you’ve been leading innovation efforts for decades or are just stepping into the field, you’ll find that the right strategies, tools, and processes are essential for driving sustainable growth and creating new business models that promise new profits.

For seasoned professionals, the common challenges are keeping innovation efforts agile and relevant in an environment where what worked 10 years ago may no longer suffice. This guide provides updated approaches and tools to help you remain at the forefront of innovation.

Understanding how to structure innovation teams and turn new ideas into real results can be daunting for those new to innovation management. This guide breaks down everything from the innovation management process to fostering a culture of innovation, helping you build a strong foundation.

Definition of innovation management

At its core, innovation management is the process of systematically managing the creation, development, and implementation of new ideas within an organization. Optimally, these ideas fit with a company's growth strategy. First, ideas are inventions until a company can commercially exploit them. An innovation is a commercially successful application of an invention.

These applications can result in new products, services, business models, or internal process improvements. The ultimate goal is to create value, collect new profits, and maintain a competitive edge.

Understanding the different innovation types is crucial. Incremental improvements and incremental innovation are type 1, often relating to core business improvements. This type is called innovating in Horizon 1.

More fundamental changes or the development of new products or new markets are type 2. This type is called innovating in adjacent business fields or Horizon 2. The development of new business models where the market and the product are new is called radical innovation or Horizon 3 innovation.

Each type comes with its own set of benefits and challenges. Adapting operations and management styles to effectively implement these different types is essential for successful execution.

A systematic innovation management process consists of multiple stages, including idea generation, evaluation, development, and implementation. By applying a structured approach to these stages, companies can ensure that their new product development efforts align with broader business goals, drive efficiency, optimal resource allocation, and enhance overall performance.

As a first benefit, a structured innovation management process ensures that progress is not a random or occasional event, but a continuous, strategic effort. When organizations adopt a formalized process for managing new product development, they can consistently generate, evaluate, and implement innovative ideas that align with business objectives. This also spurs an innovation culture, committed to continuous improvements and business growth.

Compared to less structured approaches, where ideas may come from various sources without a clear plan for execution, structured innovation management keeps the focus on the company’s goals. Ad-hoc innovation efforts often result in scattered ideas that may lack relevance to the company’s long-term strategy, whereas a structured approach prioritizes ideas that contribute to overall business growth.

Second, in a structured innovation management process, resources such as time, talent, and capital are allocated more efficiently. By systematically evaluating ideas based on feasibility, potential impact, and alignment with business goals, organizations can ensure they are investing in the right projects with the evidence and confidence needed.

Innovation management framework and a working innovation operating model

Many organizations engage in new product development, often in similar ways. At its core, innovation involves discovering a new or improved product-market fit and generating a (financial) return. Innovative solutions must address a problem in a unique or better way, creating demand among users. Additionally, companies need the capabilities to develop and deliver these solutions—it must be feasible for them to execute.

Ultimately, the benefits of creating and offering these solutions must outweigh the costs. Companies seek to build confidence throughout different process stages to ensure successful improvements along each phase.

However, how companies and teams build confidence in their assessments, the level of risk they are willing to take, where they source ideas, how many incremental innovation they pursue, and how quickly they bring them to market can vary greatly. To provide a solid answer to these questions, organizations must formalize their innovation management framework.

The ITONICS Innovation Operating Model is such a management framework. It is designed to help answer these questions, taking into account a company's ambition, history, and the dynamics of its industry.

Innovation strategy

Innovation strategy: Incremental innovation or radical breakthroughs

Identifying your innovation scope comes from recognizing the gap to your ambition. Knowing what your organization wants to achieve is the key to identifying your scope. Your company’s north star is key to understanding how close you are to reaching your full potential.

Innovation and Growth Ambition Breakdown

This understanding will help your organization to formulate its (growth) ambition. What amount of growth is expected over the next year(s)? What growth will be achieved from market dynamics? What growth will be achieved from core improvements (horizon 1) and what else is needed to meet the ambition?

The first step is knowing the growth ambition of your company and your industry dynamics. Collect the revenue outlook and match it with your outlook on what revenue can be gained by market dynamics and projects you already run. This will help you see the required portfolio contribution expected from new innovation activities.

As a second step determine the best investment split for your organization given the three innovation horizons. If you are certain to reach your ambition, concentrate on core improvements as the least risky investment. If there is still a gap estimate from where the remaining contribution can come. Are there closely related business areas that are growing and in which you can easily expand (horizon 2)? Or, are there yet unrelated market options that you can enter (horizon 3)?

As a third step codify the expectations and goals. Write down the expectations and start the exploration process and the process of building a convincing opportunity portfolio that complements the expected contribution of your already existing project portfolio. This should result in a well-thought-out innovation strategy, acting as a roadmap for your innovation efforts. This aligns the development of new business models, providing direction, and ensuring alignment with broader business goals.

Leadership and governance

Leadership and governance: Employ the right innovation engines

Different scopes need different organizational designs. Every department is typically engaged in innovation activities. A key motivation for every department leader is improving the status quo which typically results from doing things differently or adding new things. That is why, it is best to keep innovation activities in the business teams that are very closely related to their current activities.

Innovation Sources and Innovation Horizons

However, it is most of the time insufficient to also ask existing business teams to explore newer concepts. To explore the new, they need time to explore which will be missed for the current activities. That is why it is more efficient to outsource activities to dedicated research and innovation teams if the tasks diverge from the core. Yet, this also requires that the exploration within Horizon 2 and Horizon 3 is of strategic importance and needed to meet the ambition.

Another critical aspect is to not split research and development. Specific teams will also need access to resources to put their findings into practice and test assumptions. This also means that not every company needs to have venture teams if it does not have the resources or strategic ambition to grow beyond the core.

That is why, the term ambidextrous innovation has become popular. In an ambidextrous organization, organizations are split by design into teams innovating the present core and teams moving beyond it. The strength of this approach is that each team owns the discovery and execution of new opportunities related to their horizon. They do not compete on resources and have clear own responsibilities. At best, they meet on an Innovation OS to leverage synergies.

Innovation process

Innovation process: Growing the right ideas

Risk is a vital part of any innovation initiative, and the job is to increase the certainty of a result to be expected. To not over- or underinvest, the new product development process is typically split into different phases whereas each phase is used to increase confidence.

Confidence means being sure about the result. Gaining confidence reduces the risk of lost investments with no or insufficient returns. To gain confidence in investments means validating the market desire, the willingness to pay, and the technical feasibility/scalability. To secure new investment, it is thus important to collect new evidence and increase confidence at each stage to secure new metered funding.

Over the years, a plethora of different frameworks emerged. While each framework puts some other emphasis on the importance, naming, and number of steps required, the underlying principles are the same. The final goal is to find the best winning solution given several different options that promise the best return-cost relationship. To identify this best option, the complete set of possibilities needs first to be explored and filtered from the many to the one best option.

Different Innovation Processes Overview

To do so, the innovation process is organized along different stages, each focusing on certain validation aspects and providing enough information to make a decision and filter. In essence, every thought is analyzed about strategic fit, a (customer) need, (financial) impact, and (technical) feasibility. This is more important, the more other resources are needed to validate and (later) implement.

By systematically moving from one validation stage to another, firms can secure investment as only new funds are provided if enough evidence and confidence have been collected in a previous stage. If not, projects need to be killed.

Innovation speed

Innovation speed: Leader or fast follower?

Innovation, at its heart, is a resource-allocation problem; it is not just about creativity and generating ideas. The main reasons that slow down innovation processes are:

improper resource planning (not having the right resources ready to finish tasks on time)
inefficient resource utilization (choosing the wrong resource for task completion)
confusion or ambiguity (less clarity leading to taking not the right direction),
and over-engineering (focusing on details instead of the bigger picture).

To counteract these roadblocks, organizations can apply a set of SLASH tactics to accelerate their speed to innovate. SLASH stands for settle and focus, lacerate & split, automate & parallelize, store & recycle, as well as harmonize & standardize. Applying such tactics can help firms to accelerate and move fast to market, allowing them to profit from the first-mover advantage.

Innovation portfolio management

Innovation portfolio management: Maximizing return on investment

Innovation portfolios inform about the value and costs of all opportunities and projects along the three horizons.

Very typically, Horizon 1 projects have more stable return forecasts than Horizon 2 and 3 projects. That is why ambition is so important to see the perfect balance of the portfolio. After the definition of the expected portfolio balance, steering groups need to constantly analyze whether the portfolio expects to fulfill the expectation.

It is important to keep a holistic portfolio view and not judge every project on its own expected ROI as the higher uncertainty of Horizon 3 projects leads to bigger ranges and even failures. Therefore, it is important to define what loss in the worst case is still reasonable. This reason is often found in the argument that besides the losses the overall portfolio might still have a positive return.

Innovation Portfolio Management - Innovation Horizons

Besides factoring in the expected value, cost, and confidence of value realization, portfolio analysis also needs to consider time and speed. Being too late might ruin all the effort and every value hypothesis. A structured innovation portfolio thus looks constantly at the expected portfolio return (ROI), confidence level, and timelines. A common portfolio split is the 70-20-10 split.

Organizing innovation teams

Managing innovation in a large company is a key strategic decision. Finding the right balance between a centralized innovation team or decentralized hubs, innovation embedded in business units, or leveraging external partners can significantly impact a company’s innovativeness, cost structure, and agility.

Options to structure innovation management

Organizing innovation in a large company requires clear decisions about where to anchor activities. There are several options, each with unique benefits and challenges.

Centralized Team: Anchoring innovation centrally means placing all innovation activities under one dedicated team at the headquarters. This allows for strong alignment with the company's overall strategy, better resource control, and ease of communication. A single innovation hub also ensures consistency in workflows and reduces the complexity of managing multiple teams. However, centralization may limit creativity and responsiveness to market-specific needs.

Decentralized Hubs: This approach spreads innovation efforts across different regions or business units. It allows the company to be closer to local markets, leading to more tailored solutions. Decentralization can also unlock diverse talent pools and promote faster market adaptation. However, it requires more coordination and can risk a lack of alignment with the company's central strategy. Communication and consistency are key challenges in this model.

Innovation Embedded in Business Units: Another option is embedding innovation activities within each business unit. This approach ensures innovation is directly tied to business outcomes and is well-aligned with specific customer needs. It encourages an organizational culture of continuous improvement and experimentation within each unit. However, without a strong overarching strategy, this can lead to fragmented efforts and missed synergies across the company.

External Partnerships: Organizations may also choose to rely on external innovation partners, such as startups, research institutions, or consultants. This allows access to new ideas, technologies, and capabilities without the need for large internal teams. However, managing these partnerships can be complex, and over-reliance on external sources can dilute internal innovation capacity.

Key roles in the innovation management process

Certain roles play a crucial part in bringing these organizational structures to life. Whether centralized or decentralized, each role has specific responsibilities that ensure successful innovation activities across the company.

Chief Innovation Officer

Chief Innovation Officer (CInnoO)

The CInnoO is the strategic leader of innovation within the company, responsible for defining the overall innovation strategy and ensuring it aligns with corporate ambitions.

In a centralized model, the CIO oversees all activities and ensures they are cohesive and strategically focused.

In a decentralized structure, the CIO must coordinate across different regions or units, ensuring alignment while allowing flexibility for local innovation initiatives.

In embedded innovation within business units, the CIO's role becomes more about governance and providing the tools and frameworks that allow teams to innovate effectively while maintaining a unified direction.

Three Key Pillars of an Innovation Leadership Framework by Gartner

Innovation or Idea Managers

Innovation managers oversee the day-to-day execution of innovation initiatives. In a centralized system, they manage cross-functional teams focused on developing new products, operations, or services.

In decentralized hubs, they lead regional teams, ensuring that local innovations meet specific market needs but are still aligned with the company’s broader goals.

When new product development is embedded in business units, innovation managers work closely with functional teams to ensure that product or marketing innovation activities directly support business unit objectives. They become critical facilitators of translating business needs into innovation projects.

R&D or Product Development Teams

These teams are responsible for the technical side of innovation, turning ideas into tangible solutions.

In a centralized model, these teams work in one location, benefiting from close collaboration and a shared knowledge base.

In a decentralized model, R&D teams are spread across different regions, requiring robust collaboration tools and procedures to avoid duplication of efforts.

In an embedded innovation model, product development teams align closely with specific business units, focusing on innovations that directly impact that unit's goals. They are highly specialized, which can foster quicker and more disruptive innovation.

Market Researchers and Trend Analysts

These professionals are tasked with identifying new opportunities, an emerging trend or technology, and consumer needs.

In a centralized system, they gather and analyze data for the entire organization, providing insights that feed into a broad innovation strategy.

In decentralized hubs, researchers focus on local market trends, ensuring that regional innovations are relevant to specific markets.

In an embedded model, these roles are highly integrated into the business unit, providing specific, actionable insights that can drive new projects within that unit.

Innovation Champions or Ambassadors

These are employees who promote and foster an innovation culture within the organization.

In a centralized model, innovation champions act as bridges between the central team and other departments, encouraging participation and collaboration.

In a decentralized model, they operate across various regions or units, ensuring that innovation remains a key focus and that knowledge is shared across the organization.

When innovation is embedded in business units, champions are critical for maintaining a culture of innovation within that unit and ensuring new ideas are pursued.

Intrapreneurs and Incubators

These roles are pivotal for fostering disruptive innovation within a company. Intrapreneurs are employees given the freedom to act like entrepreneurs within the organization, driving new ventures or bold initiatives.

In a centralized model, intrapreneurs often work within dedicated incubators, exploring ideas that can significantly transform the company.

In a decentralized or embedded model, intrapreneurs operate within specific regions or business units, tailoring their innovations to meet localized needs while still having access to central and available resources.

Incubator managers provide the structure, mentorship, and resources that enable intrapreneurs to experiment and prototype without the constraints of day-to-day business operations.

Start-up, Innovation Ecosystem, or Partnership Managers

These roles focus on building and nurturing external relationships that can enhance innovation.

In a centralized model, they manage partnerships globally, ensuring strategic alignment with the company’s innovation goals.

In a decentralized or embedded approach, they establish regional partnerships with startups or local research institutions that drive innovation more targeted and meet specific market requirements. Their role is crucial in bringing external innovation into the company, providing access to new technologies, ideas, and business models that might not arise internally.

In any model, successful innovation depends on clear responsibilities and strong collaboration among these roles. Each model requires adjustments in how these roles function, but their core responsibilities remain centered around driving forward the company’s innovation agenda.

Sources of innovative ideas

Innovation doesn’t happen in a vacuum. A strong idea management process involves gathering ideas from a wide range of sources, both inside and outside the organization. In traditional ways, idea collection focused primarily on employees, who are closest to a company’s day-to-day operations.

However, modern idea management programs now leverage more diverse innovation sources. Many organizations today gather ideas from a range of internal and external channels, each offering valuable insights. Four key sources, supported by advanced idea management tools, are:

Internal Crowdsourcing and Employee Suggestions: Employees from different departments can easily submit ideas, fostering a collaborative atmosphere. Idea management platforms use gamification and feedback to encourage employees, ensuring their input plays a crucial role in scalable innovation.

Peer Sourcing (Customers, Partners, and Suppliers): Companies collect ideas from external stakeholders, including customers, partners, and suppliers. This collaborative approach promotes co-creation and results in practical, innovative solutions.

External Crowdsourcing and Broadcasting: By sharing challenges with a global audience, companies can receive a wide range of submissions from individuals outside their network. Crowdsourcing platforms offer a secure, accessible space for capturing these ideas.

AI-Generated Ideation: AI can automatically generate ideas based on data inputs, accelerating the ideation process. It suggests ideas, spots trends, and helps prioritize options for quicker evaluation and implementation.

Fostering the right culture to innovate

Building a strong innovative culture is crucial for any company’s long-term performance and survival. Fostering a culture of innovation means encouraging creativity, experimentation, and collaboration. An innovation culture and spirit not only drive growth but also encourage employees. By transforming your company culture to prioritize innovative ideas, you are setting the foundation for a successful market share and longevity.

To quickly shift your company culture, start by recognizing and rewarding innovative efforts. Publicly celebrating even small contributions can have an immediate effect, motivating others to get involved. When employees see their ideas valued, they are more likely to contribute and push for creative solutions.

Next, encourage cross-department collaboration. Innovation often happens when different perspectives come together, so create opportunities for teams across the company to exchange ideas. Regular innovation days with diverse contribution can spark fresh insights, help break down silos, and showcase the commitment to innovate.

Providing time and resources for innovation is another effective way to build momentum. Instead of encouraging employees to dedicate a portion of their time to explore new ideas, continuous improvement and innovation should become part of their job descriptions. This creates accountability to care about the company's future and allows people to think beyond their day-to-day tasks.

In the long run, leadership must embody these changes. When leaders consistently champion innovation, support experimentation, and model open-mindedness, they set the tone for the entire organization, symbolize the right mindset, and can create a lasting cultural transformation.

Foresight tools

Foresight tools help businesses anticipate future trends, technology, opportunities, and risks. They provide insights into emerging technologies, market shifts, and customer needs, ensuring that innovation efforts align with future developments.

Tools like trend and tech radars allow teams to map various possibilities, evaluate those, and concentrate then on the most relevant opportunities. Collaborative features like ratings or commenting enable different departments to work together on future strategies, ensuring diverse perspectives contribute to more comprehensive plans.

The most modern foresight tools also leverage AI to reduce the manual scouting effort. These tools alert trend and technology scouts about new developments and changes in trends.

Creativity and idea management tools

Idea management tools capture and organize ideas from internal employees and external sources such as customers and partners. By integrating these tools, employees can easily submit ideas, while crowdsourcing platforms expand innovation opportunities by involving external voices. Automation reduces the effort needed to filter and evaluate ideas, and AI assists in identifying patterns and suggesting the right experts.

Creativity techniques, like brainstorming and design thinking, are also essential for generating fresh ideas. Tools supporting these techniques foster collaboration by allowing teams to explore new concepts together, refine ideas, and expand creative possibilities. AI-enabled creativity tools further inspire ideation by offering relevant suggestions based on data, helping teams uncover ideas they might not have considered.

Innovation project management tools

Innovation project management tools ensure that ideas move efficiently from concept to execution. These tools automate tasks, assign responsibilities, and set deadlines, allowing teams to focus on developing high-value ideas. Collaboration features allow different teams to stay aligned and track project progress through visual dashboards.

By connecting team members and ensuring everyone is working towards a common goal, these tools streamline the innovation process and foster better results.

Innovation portfolio management tools

Managing an innovation portfolio is crucial for balancing immediate business goals with long-term success. Portfolio management tools help categorize, prioritize, and allocate resources to the most promising ideas. Collaborative capabilities within these tools enable departments to coordinate on portfolio decisions, ensuring resources are optimally deployed. This balance between quick wins and future projects allows organizations to align their innovation opportunities with overall business goals.

By integrating automation and collaboration features at every step, these tools help organizations create a structured, efficient, and forward-looking innovation portfolio, driving a growth mindset and keeping organizations competitive.

PostFinance_Innovation-Process-update-1009-2024

Click the image to read more about the process of VNTR - PostFinance

Click the image to read more about the process of DB Schenker

Click the image to read more about the process of Merz Therapeutics

Click the image to read more about the AllianceSwissPass process

Click the image to read more about the KSB process

The right innovation key performance indicators (KPIs)

An innovation program won't last long if it fails to produce measurable results. Management will eventually require concrete data. Management will ask for measuring innovation outcomes, makingg it essential to consider the strategic focus of your efforts from the outset.

Since financial outcomes take time to materialize, it's crucial to use a specific type of metric—actionable innovation key performance indicators—to justify and align current activities with future objectives.

Optimize innovation operations with innovation management software

Effective innovation management is essential for creating a growth mindset and maintaining a competitive edge. Every organization that aims to professionalize its innovation operations uses innovation management software.

The ITONICS Innovation OS is the best innovation management software, enabling maximum innovation success. With ITONICS, you will get the best to streamline foresight, idea management, and innovation project management. ITONICS enables you to:

Eliminate Information Silos: Dispersed teams and disconnected data often result in missed opportunities and duplicated efforts. With ITONICS, all your innovation projects, ideas, and market insights are centralized in one place. Create transparency and reduce inefficiencies by keeping everyone on the same page.
Automate opportunity discovery: Manually tracking and evaluating new opportunities takes time and resources. ITONICS automates it and keeps you up to date with the latest trends, technologies, and market shifts, providing insight and inspiration.
Turn strategy into actionable plans: Translate your strategic goals into clear tasks and timelines. ITONICS enables you to build interactive roadmaps that break down long-term objectives into specific initiatives and allocate resources effectively. Ensure every team knows their role in driving the strategy forward, making it easy to track progress and course-correct when necessary.
Monitor progress in real time: Stay on top of execution with dashboards and progress tracking. ITONICS lets you see how the innovation strategy unfolds across all departments, projects, and teams. Quickly identify roadblocks, monitor performance against key milestones, and keep execution aligned with strategic priorities.