How Human Resource leaders make the most of innovation management

With innovation management capturing rising interest from human resource managers and directors, Exago’s team took part in the Expo’RH2018 in Estoril, Portugal, to discuss the latest news and trends in the sector. The event organised by the International Faculty for Executives gathered hundreds of HR directors from leading companies such as Nestlé, Ageas, Pfizer, Renova and McDonald’s, under the motto “Experience is the way”, on March 14 and 15.

In the spotlight was the importance of communication for employee engagement. Effective communication not only has to be continuous, but also two-sided, said Maria do Rosário Vilhena, Human Resource Director of Nestlé Portugal. The food and drink company is using focus groups to launch internal challenges and collect insights, while searching for better ways to convey “consistent messages to everyone” across the different business units of their large organisation, “and to be understood by all”.

Ongoing communication and a close relationship with employees has also been part of Renova’s success, explained their HR Director, Paulo Santos. The family-run paper consumption goods company expanded internationally as “the sexiest paper on Earth” and is a renowned case study for incremental innovation.

To open communication channels and bring together the experience and know-how of all employees, larger, multinational companies are also using platforms that allow them to reach their people across business units and geographical locations.

Promoting change through your innovation programme
Internal communication is critical in processes of organisational change, according to Paulo Teixeira, Pfizer Portugal Country Manager. The pharmaceuticals company opened a communication channel with employees through a post box placed in each business location to get ideas and suggestions, but also their feedback. Similarly, an internal tool has supported the recent image and culture change at Montepio bank, Fátima Silva, Head of Talent & Development at Montepio bank, told the audience.

To strategically realign its workforce, the insurance company Ageas used Ding!, built on Exago innovation management software. After Ageas bought AXA’s Portuguese operations, Ding! is helping the company spread its organisational culture and communicate with all the employees from the different brands they now operate, Portugal Human Resource Director Rita Baptista said.

“Listening to our employees was the most important factor for this successful transition, since we were able to make people feel part of that change,” she added. The Ageas management was able to promote company goals and engage people in the process of transformation, bringing everyone together in a collaborative innovation platform.

The HR Director of ANA – Aeroportos de Portugal, Catarina Horta, also highlighted the importance of a company’s collective intelligence as a learning tool.

Keeping in mind the words of Ray Kroc
The quote “None of us is as good as all of us” is attributed to the founder of McDonald’s and defines the company’s DNA, says Sofia Mendonça, HR Director of McDonald’s Portugal. She explains how collaborators, franchisees and suppliers are the corporate pillars involved in the business evolution. The iconic 50-year-old Big Mac, for example, is a by-product of this approach: it was originally suggested by a Pittsburgh franchisee after several construction workers commented that the hamburgers were too small.

McDonald’s connects with those three pillars through several types of channels, both face to face and digital. Gamification and social features, along with a vivid communication tone, are particularly relevant in the digital linking to their workforce, whose average age is between 19 and 23.

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For step 2 in cost-cutting within your innovation agenda, you will need this

Having defined the strategic cost-cutting goals within your innovation agenda, it needs to be run with the same board sponsorship, direction and accountability as any other critical initiative. It is important to ensure central governance, senior management agreement and employee engagement.

The centralisation of a cost-cutting initiative is vital to avoid project duplications, to benefit from synergies and to focus on clear areas of improvement.

However, the initiative should also have branches and an army dispersed across the company, mobilising directors and managers of the different areas around this innovation movement and opening minds to collect insights from every contributor. Right from the point of planning, make sure you identify the sponsors from each business area of the strategic cost-cutting and improvement programme.

People with the capacity to make decisions based on employee insights must be mobilised and should have defined timeframes to gather specific insights and execute changes aligned with your innovation agenda. In other words, the cost strategy should be promoted by the company’s leadership, sponsored by the management team and be engaging enough to capture employees’ participation.

STEP 2 is therefore about delivering cost optimisation with the support of the CEO and top managers, helping you clearly define areas of innovation and improvement from the beginning, as well as how to address each of these areas.

Andreia Agostinho Dias, Sales Executive
Diana Neves de Carvalho, Exago’s CEO

You can access the full paper here

 

What are the good and the bad costs in your innovation agenda?

When introducing a cost-cutting strategy in your innovation agenda, you should first have a clear view of your company’s strategy and map out good and bad costs for programme intervention, at macro and micro levels. Both macro- and micro-level-oriented strategies have value and they often make more sense combined.

At a more tactical level, and in line with your strategy, you need to look at your whole organisation and differentiate between the critical ‘good costs’ and the non-essential ‘bad costs’:

  • Bad costs are those not aligned with the overall growth strategy of the company;
  • Good costs support the business capabilities needed to achieve the overall growth goals.

In an online article in Forbes, PWC’s strategist Rodger Howell says that ‘once a company’s costs are classified, strategic cost-cutting and improvement become a process of minimising exposure to bad costs and maximising investment in the best ones’. He adds that this practice helps to ‘create a more resilient growth model’, which is ‘particularly important during times of uncertainty’.

These bad and good costs can happen at both micro and macro level, as the figure below shows. It is key that you keep this matrix is mind when defining your strategic cost-cutting and its goals, and how to address each quadrant.

Strategic cost-cutting matrix

Overall, the bad costs are waste and an outcome of inefficiencies, which can and should be reduced. Do not underestimate them. Even micro-level bad cost-cutting, such as reducing power and resources use, can have tremendous impact on your balance account. Not only are these costs easily identifiable by your employees, but they can also be incorporated into your incremental innovation agenda in ongoing challenges, so that you are always capturing and addressing new and existing inefficiencies.

Measures to cut bad costs at a macro level (such as closing units or laying off people) may, however, have a stronger, higher and more immediate impact on your financial balance. But is it the way for your growth? We are not saying it isn’t part of it, but there are other ways you should always consider as well. These costs are better leveraged by external teams carrying out a strategic analysis to understand which costs are no longer aligned with the organisation’s strategy and can therefore be eliminated without negatively impacting core business.

On the other hand, good costs are those that support business capabilities to achieve growth goals. They may be, in consequence, worthy of more investment, so that in the mid to long term you end up saving more or increasing return.

At a more macro level, they will likely imply some investment and a more disruptive transformation, but can also have a larger financial impact. For instance, if you decide to redesign a profitable business area, you can open doors to new clients and markets and to higher returns.

At a more micro level, for example, by changing a product material or a method of doing things, you can also pave the way for an unexpected internal revolution. Here again your internal workforce can provide useful insights to redefine current products, services and processes. There is always space for improvement, and including this quest in your innovation agenda will help you structure and centralise the process, thus reducing investment in external advisory services and bringing interesting and relevant inputs for your business aligned with your needs.

There is no magic formula and no equation to tell you how and where to cut exactly.

The main message is: remember to look at the bigger picture and understand which methods are more efficient in which situation, so as to develop an effective strategic cost-cutting and improvement strategy.

This process of employee engagement and empowerment will also make your organisation more future-fit and will create a cost-conscious culture, essential to creating a sustainable cost-cutting and improvement strategy.

Andreia Agostinho Dias, Sales Executive
Diana Neves de Carvalho, Exago’s CEO

You can access the full paper here

 

How to introduce a cost-cutting strategy in your innovation initiative: Step 1

To introduce a cost-cutting strategy in your innovation management initiative, and ensure that your business remains relevant and able to maximise its potential under less favourable circumstances, you should take five major steps.

Get started with STEP 1: Define your strategic cost-cutting goals, which can be incorporated in your innovation agenda

In other words, you should first have a clear view of your company’s strategy and map out good and bad costs for programme intervention, at macro and micro levels, within your innovation agenda. The starting point for any strategic cost-cutting initiative is therefore a clear understanding of a company’s strategy – of where you want to go to and how you believe you can get there.

You will need to determine priority areas and find the right cost-cutting structure, given the strategy you want to pursue in the near future, but also in the mid to long term. Some cuts are fundamental and highly advantageous but more difficult to make, and imply structural change and preparation for that change physically, technically, and even mentally.

 

From strategy to specific cuts 

Having in mind your company’s vision and strategy, you can then set your programme’s specific goals. The cuts you may want to make and the ideas you may implement to meet those goals should position your organisation for growth, and can be done at both macro and micro level.

The nature of macro- and micro-level cuts

 

Innovation management platforms are particularly useful for companies to identify relevant cost-cutting or cost improvements at micro level. These tools give voice to employees from different departments and across borders. They leverage the cumulative business knowledge and allow voices and ideas to surface and reach management in an effortless and efficient way.

Nevertheless, let’s not oversimplify the subject – that’s exactly what you should avoid. Both macro- and micro-level-oriented strategies have value and they often make more sense combined.

Andreia Agostinho Dias, Sales Executive
Diana Neves de Carvalho, Exago’s CEO

You can access the full paper here