The innovation audit - Marketing Strategy

This part of the auditing process reviews how effectively the organization is able to deliver the level of innovation necessary to create new products, new services, and new ways of undertaking activities. Success in these activities is likely to depend on the company successfully harnessing the latent creativity in individuals at all levels in the organization. The innovation audit examines whether the necessary assets and competencies are present and examines four key areas:

• The current organizational climate with regard to innovation.
• Hard measures of the organization’s current performance in innovation.
• The organization’s policies and practices that are currently used to support innovation.
• The balance of the cognitive styles of the senior management team.

The organizational climate

There are two components to the audit of the organization’s climate: an attitude survey, and the technique of metaphorical description.

An attitude survey of key areas of the organizational climate that affect creativity

The aim of this component of the audit is to discover the current feelings of staff about the organizational climate. There are eight influential factors that are crucial in supporting innovation and four areas that act as constraints (Burn side, 1990). Support for creativity and innovation include:

• Teamwork :the level of commitment to the current work, the level of trust between team members and the willingness to help each other.
• Resources :the amount of access to appropriate resources in terms of facilities, staff, finance and information.
• Challenge :the challenge involved in the work undertaken in terms of its importance and the very nature of the task. Is it intriguing in itself?
• Freedom :the amount of control individuals have over their work and ideas. How much freedom are they allowed to decide how a project or task will be undertaken?
• Supervisor :managerial support in terms of clear goals, good communication and building morale.
• Creativity infrastructure :level of senior management support and encouragement of creativity and the structures necessary for developing creative ideas.
• Recognition :the level of recognition and the type of rewards given for innovative ideas.
• Unity and co-operation :factors such as collaborative and cooperative atmosphere and the amount of shared vision in the organization.

Factors that act as constraints on innovation in an organization include:

• Insufficient time :there is a lack of time in which to consider alternative approaches to undertaking work.
• Status quo :a traditional approach, an unwillingness of managers and other staff to change the current way of doing things.
• Political problems :battles over areas of responsibility and lack of co-operation between different areas of the organization.
• Evaluation pressure :the evaluation or feedback systems are perceived to be inappropriate. The environment is focused on criticism and external evaluation.

Two other areas should be included in the audit of the staff’s perceptions on organizational climate:

• Creativity :How creative is the organization perceived to be overall?
• Productivity :How productive is the organization perceived to be?

Metaphors :

This audit is about innovation and it should therefore use proven creativity tools as part of the process; the second part of the evaluation of the organizational climate therefore uses the technique of metaphorical description (Morgan, 1993).The power of the metaphor approach is that it can overcome the limitations of literal language and describe far more complex relationships and connections. Individuals are asked to describe their organization in terms of a metaphor. For example: ‘This organization is like a well-oiled machine.

It runs well and doesn't’t make too much noise’, or‘This organization is like a supertanker – it takes a long time to change direction’. These metaphors can then be analysed. They are likely to be either positive or negative observations based around seven organizational practices:

• managerial skills
• organizational structure
• operations
• organizational life cycle
• strategic orientation
• people orientation
• power orientation

This method allows a more rounded perspective of the organizational climate to emerge.

Hard measures :

There is a range of hard measures that can be reviewed to establish the current organizational performance in the areas of creativity and innovation:

• Rate of new product development in the last three years. Davidson (1997) suggests that both total innovation development and percentage success rate are analysed (see Figure below).
• Customer satisfaction ratings. These should be reviewed not just in terms of the actual core product but across all areas of customer service.
• Staff turnover.
• An innovation/value portfolio analysis (see Figure below)should be undertaken on the organization’s strategic business units or products to establish whether they are:
  • Settlers :Businesses or products that offer the normal (me-too) market value.
  • Migrators :Businesses or products that offer value improvements over competitors.
  • Pioneers :Businesses or products that represent value innovations, such as the Dyson vacuum cleaner or the Sony Walkman.

Product and service innovation performance measures

Research undertaken on a hundred new business launches (Kim andMauborgne, 1998) discovered that 86 per cent of them were standard market value (me-too) launches, or only offered incremental improvements. These businesses only generated 62 per cent of launch revenues and 39 per cent of profits. The remaining 14 percent of launches were businesses that created markets or recreated markets that were already in existence. These ‘pioneering’ businesses,although only 14 per cent of the sample, generated 38 per cent of revenues and massive 61 per cent of profits. The clear implication of this study is that organizations that are driven by future profitability need to have a spread of business across the portfolio. Companies that find the majority of their businesses or products are in the settler area are paying insufficient attention to the innovation process.

The organization’s policies and practices that are currently used to support innovation

This review consists of identifying current policies that may be in place to support innovation. It would also review whether any structures or procedures have already been developed to try and facilitate creativity and innovation.

The innovation/value matrix

The balance of the cognitive styles of the senior management team

The final part of the innovation audit is to evaluate the cognitive preference and behaviours of the management team. Although individuals have the capacity to make use of all their cognitive functions, one area tends to dominate. The four cognitive preferences are shown in Figure below.

It is important to have a mix of cognitive styles in the senior management team that will influence the business’s orientation towards creativity and innovation. Researchers have hypothesized the likely influence of a range of senior management teams’ potential cognitive profiles as illustrated in Figure below.

Cognitive styles

The senior management’s cognitive composition and its likely relationship to business strategy