2.1.3 How to implement an innovation audit

The procedure followed in order to carry out an innovation audit is described below:

Step1. Company decision for Innovation Audit

As with all new management interventions, top management must clearly express his/her willingness when deciding to implement an innovation audit. However, in small SMEs some managers might not be able to even identify if they need more systematic innovation management. In some other cases the decision for an innovation audit might come from a company crisis or might be the result of a management briefing with executives or an idea highlighted during a brainstorming session. In addition, European competition policies during the last decades have suggested that innovation should be a top priority for SME’s and many useful tools are offered to support innovation in SMEs. Regardless of the origin of the idea for an innovation audit (i.e. crisis, strategy formulation, by chance, E.U policy, etc), management need to be fully aware, accept and be supportive by allocating the required time and in some cases the budget to begin the innovation audit process. Management’s decision and active involvement in the innovation audit has a political role and will ensure the commitment of all stakeholders involved and ultimately the audit’s success.

Step2. Initial phase (Team, strategy fit, questionnaire)

Team building
Innovation audit shouldn’t be seen as a quick solution. To get maximum value from it you shouldn’t take the process lightly and allocate tasks before your team is ready. It is highly recommended that the innovation audit team comprises executives to ensure the inclusion of the required multi-perspectives (innovation is holistic and ecological). To address innovation dynamics in a real business environment like your company, you have to analyse the company as a living organism which is affected by many interrelated factors similar to a real ecosystems. However, in some cases, such as, where a company has a complex strategy, with several premises and units and with a high number of staff, the know-how of some experienced innovation consultants might be required.

Strategy fit
This stage involves the alignment of the innovation audit with the business strategy. Revisiting current strategy documents are a prerequistie for this stage because to have success, an innovation audit must be very well aligned with the current business strategy and aimed to fill in existed strategic gaps. Therefore and before starting drafting the innovation audit questionnaire, an important step for the team is to discuss strategy documents openly, have some briefings with the top management, check the current status of company’s sector and try to answer questions like:
 

 

Please stop for 5 minutes, revisit paragraph 2.1.1 (content of innovation audit) and check the indicative list of the possible areas to be investigated during an innovation audit.
Where do you think your company suffers?
Which of these areas seem to be a priority for being audited?

Questionnaire
In this stage, the innovation audit questionnaire is developed and customised to ensures that it meets the company's specific needs. The general model for an innovation audit questionnaire which we suggest you use has been developed by Gerard H. Gaynor. Before customising the questionnaire, we advise you to follow the source1 and see the questionnaire in its original form. In addition, during the 'strategy fit' step the innovation audit team will acquire new information and other useful details which will result in a more customised innovation audit questionnaire/survey. The team will need to select the most important areas to be audited (see the list in paragraph 2.1.1), to properly phrase questions, to use company and sector terminology and to organise pilot surveys to test the questionnaire.2

Step 3. Interviews, data analysis and report phase (action plan)

Interviews
Undertaking the survey. Here, as an innovaton audit team you will have to decide which method to use in collecting the data. Some schools of thought suggest that respondents should read the questionnaire and then be interviewed while others suggest a follow-up discussion in order to clarify issues after the questionnaire is completed. Thus, the audit team has to plan interviews in advance, preferably with all staff. Although interviewing all staff might increase the cost and duration of the audit, we suggest this because innovation is the result of many environmental factors co-existence, it originates and is defined by the human behaviour at work nobody should be excluded from such a survey. Previous innovation audit projects suggest that such interviews last longer than other surveys and should be conducted in a manner, which would help respondents to reply with honesty.3

Data analysis
Data analysis and evaluation. This step is important and it requires basic know-how of statistics or better a simple table to find out tendencies (orientation to positive or negative) for some important innovation factors. In some cases some more advanced statistics might be required. The statistical methodologies used here are based on the data format in which the replies were given to the various questions. However, in many cases simply using some very basic statistics like the average percentages of a reply may give clear indications about the possible problems with regard to innovation as seen in the following example.

Let’s take one of the questions in the suggested questionnaire model from the “current culture” session: Are employees knowledgeable about the purposes for which the organization exists? YES NO

If the great majority (lets say 80%) of interviewed staff reply “No” to this question, then it is obvious that the mission and strategy of the company being studied have not been communicated well and broadly enough to all staff. Managers and the innovation audit team now have a clear indication about one of the possible areas for future changes and management interventions. How do they expect to motivate personnel, if 80% feel that they are not well informed about important issues like the company mission? How can they expect staff to be committed, energized and focused on the right things when not all staff are “in the same boat” in terms of strategy awareness?

Report phase
Presentation of results and preliminary discussion on the findings. The first innovation audit results should be presented to and discussed with managers before preparing the final action plan. This step is required because it is very likely that managers will give a deeper insight into certain findings while also asking the audit team to refine some of the initial findings.4
Traditionally, innovation audits have been used to identify a gap or deficit, and then use this “gap analysis” to drive performance improvement. It is very important that the innovation audit is used to reach conclusions about the organisation’s innovation management, perhaps for different innovation issues. It is vital that the audit ends up in an action plan with precise conclusion as regards the necessity of, for example, of culture change, information sources, creativity tools, project organisation, resources, time management, etc5. In terms of timescale, we find that such an audit typically takes four weeks to complete from initial scoping and tool design to completion of draft findings6.

Now it’s your turn to test if after reading the article you are well prepared to do an innovation audit. Follow the link with the questionnaire model and take your time to respond.
Did you find it difficult to do it on your own or did you find some questions not suitable for your company?
Then as suggested earlier, you need to adapt the questionnaire with the help of other managers or staff from different units... Don’t you think that if all staff gave honest replies for these questions many hidden areas and problematic situations hindering innovation in your company would come up and would help you to address innovation more successfully?

Possible obstacles to implementation.

Most stumbling blocks are not linked to environmental conditions or other factors. Most impediments are internal to the firm with people frequently at the top of the list.7  

  • Resistance to change, lack of motivation, fear of failure, resource constraint and corporate structure were the main constraints to entrepreneurial behaviour. Moreover the mere act of asking questions or seeking opinions in an audit is enough to make many employees nervous or outright fearful, especially those who covet status quo. Thus, confidentiality must be guaranteed and perhaps independent auditors should be used8
  • An innovation audit team usually operates through persuasion and personal influence, they need to have strong interpersonal, communication and presentation skills as well as being energetic relationship builders. In addition, this implies that elements such as flexibility and ability to adapt to uncertainty are key traits for any team members. The innovation audit team need a high degree of autonomy so that they can deal with situations and solve problems as soon as they occur9
  • Employees often perceive an audit as an opportunity to unload negative feelings about the organisation or specific individuals. The auditor can learn a great deal from this information but must protect everyone’s interests while retaining highly determined to grasp the reality of the climate10
  • Managers will claim the organization is very innovative until someone asks that the innovations be identified
  • Many managers don’t have a full idea of what is involved in the innovation process
  • Too few managers think about new-to-the-market or breakthrough innovation
  • Organizations lack information about their resources, including having insufficient information about the usable competencies of their people
  • Managers lack knowledge about the fundamentals of project management. They know about all the tools but can’t do the up-front work effectively.

Do you think these obstacles would emerge in your organisation as well? Name which of obstacles or other factors that are not included above, would probably emerge in an innovation auditing procedure.


1 Innovation by Design: What it Takes to Keep Your Company on the Cutting Edge By Gerard H. Gaynor, Published by AMACOM Div American Mgmt Assn, 2002
2 www.trainmor-knowmore.eu/26260557.en.aspx
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5 www.innovationfactory.nl/innovation-culture/innovation-audit.html
6 www.innovaro.com/inno_updates/Innovation%20Briefing%2007-07.pdf
7 www.alliedacademies.org/Publications/Papers/
8 www.innovaro.com/inno_updates/Innovation%20Briefing%2007-07.pdf
9 www.trainmor-knowmore.eu/6F47C5E9.en.aspx
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