Companies have been using a variety of innovation methodologies and technologies to improve their innovation capabilities for more than a decade. Now, empirical research is identifying the ways that are the most effective. Is design thinking universally helpful to organizations across all industries? Or is it crowdsourcing? Or big-data analysis? Empirical research answers these questions and explains why.
Researchers at InnovationOne, LLC, conducted a study in 2019 on mostly small and medium-sized enterprises (SMEs) in cooperation with The Conference Board and its member companies in North America, Europe, and Japan. To measure an organization’s innovation commitment, culture and capability, the researchers used The InnovationOne Culture Index. (In brief, the InnovationOne Culture Index© is a scientifically based, proprietary tool that has been used by more than 2,000 organizations across a variety of industries. Companies that score in the top quartile of the InnovationOne Culture Index© reported higher financial performance than bottom quartile performers by as much as 22%.)
This column is a summary of an academic article by Grant Alexander Wilson & C. Brooke Dobni (2022) “Which Innovative Methodologies and Technologies Help Improve Firm Performance? A Global Study of SMEs,” Research-Technology Management, 65:4, 50-60, DOI: 10.1080/08956308.2022.2032973.
The researchers studied the effectiveness of eight methodologies and technologies for improving an organization’s innovation capability and performance. They were:
- Open innovation
- Big data analytics
- Innovation management software
- Scientific discovery
Methodologies and Technologies with a positive impact on performance
A total of 437 responses were received from respondents in 11 industries and 27 countries. The InnovationOne researchers found that the following methodologies and technologies had a positive effect on organizational performance:
- Open innovation
- Innovation management software
- Scientific discovery
Those without a significant impact on organizational performance
The positive effects on improving performance were not significant for Stage-Gate, design thinking, and big data analysis. This was unexpected and interesting, as previous research has supported the link between these innovative practices and performance (Berman 2012; Clark and Smith 2008; Cooper and Kleinschmidt 1991; Griffin 1997; Grönlund, Sjödin, and Frishammar 2010; Trabucchi and Buganza 2019).
Differences by Industry
The researchers dug further into the data to learn why these three highly touted methodologies were not adding to organizational performance. The answer lies in the industry that uses the methodology. The results from the additional regression analysis found that the Stage-Gate and performance relationship was positive and statistically significant only among healthcare, IT, and manufacturing organizations.
The relationship between design thinking and performance was positive and statistically significant only among arts and entertainment, marketing, and retail organizations.
The relationship between big data analytics and performance was positive and statistically significant only among finance, healthcare, and IT organizations.
Comments from Executives
The executives who participated in the study highlighted the importance of crowdsourcing, open innovation, innovation management software, scientific discovery, and prototypes over the other methodologies and technologies included in the study.
Many executives who responded to the open-ended questions in the survey supported the importance of crowdsourcing and open innovation. One executive commented, “We need to be more inclusive of people and resources when innovating, both internally and externally,” which summarized the need for these innovative methodologies and technologies. Other participants emphasized the importance of innovation management software. One executive said, “We never know what product or project will be successful, so we need to track everything for success.”
Many executives mentioned scientific discovery in the open-ended question. One statement, “All successful innovations start with discovery and failing,” encapsulated the scientific discovery sentiment of 75 percent of the executives. The statement “Prototyping is a strategic priority and essential performance prerequisite” summarized the view of more than 50 percent of the executives.
“All successful innovations start with discovery and failing,” encapsulated the scientific discovery sentiment of 75 percent of the executives.
The findings are consistent with previous work that suggests not all innovations are created equal when it comes to enhancing performance (Pisano 2015; Rosenbusch, Brinckmann, and Bausch 2011). The value of the research highlights which innovation methodologies and technologies have the potential to enhance performance across industries and cultural contexts. Additionally, the study presents innovative methodologies and technologies that have industry-specific relevance and performance benefits (Stage-Gate, design thinking, and big data analytics).
Although Stage-Gate is regarded as an industry standard for product development, its application is not universal. Given the non-linear nature of innovation, Stage-Gate is optimal for industries that require coordination across functions, such as in manufacturing settings, not in service-based industries.
The findings showed that companies in the arts and entertainment, education, finance, marketing, real estate, retail, telecommunications, and transportation industries did not see direct performance benefits from Stage-Gate. Specific industries such as health care, IT, and manufacturing are more suited to realize Stage-Gate’s performance-enhancing benefits. This is important for business leaders to understand when considering investing in Stage-Gate.
One executive said, “We never know what product or project will be successful, so we need to track everything for success.”
Design thinking is touted broadly as an optimal solution for businesses in different industries and with diverse business challenges. Design thinking has primarily been used in business-to-consumer markets as opposed to business-to-business ones. The core of design thinking is consumer-focused problem solving that best aligns with the needs, behaviors, and habits of the target market. The results support the performance effects of design thinking in arts and entertainment, marketing, and retail. Separating the consumer’s perspective from the design of arts and entertainment is counterintuitive; it seems logical that design thinking is important to this industry.
Similarly, design thinking is suitable for the consumer-oriented and experiential nature of retail. In contrast, researchers consider design thinking less relevant in situations with well-defined problems (Mintrom and Luetjens 2016) or when there are proven methods, standard operation procedures, and best practices.
“We need to be more inclusive of people and resources when innovating, both internally and externally.”
The observed lack of significance between design thinking and performance in healthcare settings is unexpected because researchers have previously found design thinking improves patient experiences and product innovations (Kim, Myers, and Allen 2017; Roberts et al. 2016). However, in some healthcare sectors such as medical device manufacturing, design thinking may be less relevant due to highly specific and regimented processes. Accordingly, the inconsistency in the data may be due to the types of healthcare companies that responded to the survey. Researchers recommend future research to explore this apparent inconsistency.
Big Data Analysis
One of the most interesting results from the study was the lack of significance between big data analytics and performance, which contrasts with prior research that underscores the value ascribed to big data (Berman 2012; Dobni and Klassen 2020; Trabucchi and Buganza 2019). Intuitively, one would assume that the more information executives, employees, and managers have, the more likely they are to make decisions that improve their market position.
According to Dobni, Wilson, and Klassen (2021, p. 6), “Firms that capitalize on information from analytics can use the data to make decisions that enhance their innovativeness and competitiveness.” Companies in industries that have traditionally been data-focused—such as those in finance, health care, and IT—are more likely to realize the benefits of big data analytics. SMEs, however, may not have the capacity and personnel to undertake comprehensive big data gathering and analytics. The results showed that big data analytics and performance were correlated among companies in finance, health care, and IT industries. While big data analytics may have universal applicability, some industries are more equipped than others to unlock its full potential.
“Firms that capitalize on information from analytics can use the data to make decisions that enhance their innovativeness and competitiveness.”
The study highlights innovative methodologies and technologies that have cross-industry performance benefits, while others, like Stage-Gate and design thinking, are more applicable in some industries than others. Although several innovative methodologies and technologies have widespread applicability, there is no “one-size fits all approach.” Moreover, data from the global study suggest that innovation-oriented culture is the most important determinant of performance among firms.
After a decade of using innovation methodologies and technologies, empirical research is beginning to reveal the innovation methodologies and technologies that help improve innovation, and in which industry. Executives should be thoughtful about which methodologies and technologies they purchase, as the effectiveness of many of these methodologies and technologies are better insome industries than others.
About InnovationOne®, LLC.
InnovationOne®, LLC helps organizations worldwide build a culture of innovation and make it sustainable. InnovationOne® uses a scientifically developed assessment to measure, benchmark, and improve your company’s culture and capability to innovate. Companies scoring in the top quartile of our InnovationOne Culture Index© reported higher financial performance than bottom quartile performers by 22 percent. The latest research shows that R&D Labs can improve their performance by 20 to 30 percent with higher innovation culture scores. Measure and ignite your culture of innovation.