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A guide to innovation governance

by Jackson B

Barrie Dowsett ,Myriad Associates…

According to the government’s latest Innovation Survey published earlier this year, 38% of UK businesses were “innovation active” in 2016-18. This is actually a decrease compared to 49% in 2014-16, and is the lowest level since 2008-10 when the figure was 37%. It’s a concern, as innovation is going to be crucial in rebuilding the economy after the pandemic. Good innovation governance throughout an R&D project is critical, especially at this time.

An organisation will only succeed long term if it takes a strategic, proactive approach to innovation governance right from the top downwards.

What is innovation governance?

Innovation governance provides a framework for a company to define the parameters of its innovative projects. It allows for the mission, focus and implementation of company innovation to be laid out, addressing the scope of a project as well as its challenges and processes.

Innovation governance also looks at innovation as a whole, right across the company. It’s concerned with all types of innovative work, not simply with the development of new technologies and products.

Implementing innovation governance: Six key steps

There are six important ways in which innovation governance can become part of a company’s fabric. It’s worth high level managers being aware of them from the start, and revisiting each point regularly throughout the project. They are: 

  • Defining a vision

Being clear about the purpose and objectives of any innovative work is essential from the outset. Those taking a lead role need to set out their priorities and goals, along with timescales. Of course, some areas of the business will more readily engage than others, but it’s important to focus on what really matters to the company as a whole. Is it to increase competitiveness in a certain area, or make efficiencies? Perhaps it’s on boosting the brand’s reputation? 

Right at the centre of innovation governance is the clear message that innovation is vital to the ongoing success of the company. The vision should be as specific as possible, with measureable, reportable objectives.

  • Establishing structures

The whole point of innovation structures is that they must be specific. Processes and platforms need to be outlined, right down to individual job roles. What systems will be in place to make sure elements of the projects are delivered on time? Who will take on what role within the project, and what external collaboration is needed?

  • Developing capabilities

It may well be that a company doesn’t have all the skills and expertise it requires for an R&D project in-house. This means that outsourcing is often inevitable, but how managers approach this is critical. They need to know the exact capabilities required against what they’ve got, and look to solve any problems like warehousing space or manufacturing infrastructure. Additional staff may need to be employed part or full time, and investment in new technologies may also be necessary.

  • Managing risk

Innovation is, by its very nature, a risky business. So it’s important to balance those risks against the potential rewards.

Risks also need to be set against the organisation’s ambitions. How well could it weather any negative impacts on finances or brand reputation if the R&D project fails?

While eliminating risk altogether simply isn’t possible, there are ways it can be minimised through intensive research and cross-departmental collaboration.

An effective way of checking the progress of an innovative project is to set markers along the way. These are opportunities to review what’s been achieved, touch base with partners and keep a tab on resources. If the work has gone off track or isn’t working out as expected, adjustments can then be made without having to start all over again.

  • Communicating effectively

Innovation governance is highly valuable when done correctly, but only if all parties are kept in the loop. All staff and stakeholders must understand why decisions are being made so they can see the bigger picture in what the innovation is trying to achieve.

How companies do this is up to them. Some send round regular email shots or update their internal wiki. Many also hold face-to-face (or these days, Zoom) meetings so staff can ask questions too.

Effective communication also builds trust and transparency, in turn benefitting company cohesion. If staff don’t understand the point behind an innovative R&D project, they’re less likely to get on board with it.

  • Allocating resources

The right people need to be in place to innovate, but they also need the right support. Portfolio management is essential here, as it allows for the effective administration of various project scopes, objectives and timeframes. It’s at this point managers should also ask themselves what processes will take the most time? What is the most cost effective way of bringing the new innovation to market, and what investment is needed to get it there? 

But innovation doesn’t come cheap. How can companies meet these costs?

The good news is that the UK government has long supported company innovation by offering tax relief towards the cost. The scheme is called R&D Tax Credits and is open to any UK company of any size and in any sector.

It’s designed to encourage innovation by supporting companies that seek to overcome specific technological or scientific uncertainties. This may be through the development of a new product, process or service, or by substantially improving an existing one.

For profit-making companies, the benefit is offered as a reduction in Corporation Tax. Loss-making companies can claim a cash credit instead.

SMEs are able to claim as much as 33 pence in every £1 of R&D expenditure. Larger companies claiming under RDEC can be awarded 10% of R&D costs, although their claim amount tend to be higher.

Find out more about R&D Tax Credits and how to apply.

To conclude

Getting innovation governance right is essential if a company’s innovative aspirations stand any chance of coming to fruition. Organisations are made up of groups of individuals, all with different skills and disciplines, but they need to be guided towards achieving the same fundamental goals. The only real way to achieve this is by organisations concentrating on their governance system and its improvement. Critically, managers must focus on managing the system of innovation – not just the people within it.

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