Industrial companies invest substantially in R&D and technology to stay competitive and drive growth. However, a large share of these innovation efforts fails to deliver the expected value because of strategic and organizational barriers within the organization, many of which are entirely avoidable. Beyond the financial impact of lower returns on investment, these obstacles generate internal friction and frustration, undermining the company’s commitment to innovation in the long term.
Understanding and addressing these common obstacles can therefore help companies develop a more effective and efficient approach to managing innovation.
In this post, we review the seven most relevant internal barriers we have identified over 25 years of management experience, along with some practical tips for addressing them. This is not theory, but rather a collection of insights drawn from real-world experience.
Do you recognize them in your own organization?
1. Great Idea, but Not for Us — When Strategy Is Missing
This is where it all begins: We need great ideas to work on, but great ideas for our business. We often become excited about new concepts and prototypes that, despite their appeal, do not really fit our technical capabilities, market positioning, or long-term objectives. These initiatives will, sooner or later, derail, consuming resources that would be better allocated to other ideas.
Our tip:
Invest time up front in developing an innovation strategy based on the company’s strategic objectives. Define priorities around the what (product areas, technical fields, markets, customers, channels, etc.) and the how (the innovation approach). A well-defined innovation strategy helps teams select and develop ideas that truly support the company’s business plan.
2. Too Much Copying — Misunderstanding the Market Reader Strategy
Innovation intensity varies from one company to another. A smart approach to renewing our product portfolio is to imitate successful competitors’ products. This is the typical innovation approach for market readers. The problem arises when we imitate too closely. Besides the potential IP issues (which we will come back to later), this approach rarely helps us gain market share. At best, we can aspire to maintain our current position. We should therefore question whether this is the best return we can get from our R&D investment.
Our tip:
Adopt a truly customer-centric approach. Try to improve the product or service through small tweaks that differentiate it and create more value for your customers (and the distribution channel). It is not about reinventing the wheel, but about making it better.
3. The Devil Is in the Details — Poor Project Management
Innovation projects are (very) complex. They involve numerous interconnected activities and countless details. Skipping a step or doing something at the wrong time can have significant consequences. Think, for instance, of approving CAPEX to upgrade a manufacturing line before confirming product demand, or publicizing a product before applying for patent protection. The natural sequence of events may seem logical, but it is very often overlooked, particularly in projects involving many experts. A seemingly minor project management mistake can derail an otherwise promising innovation project.
Our tip:
Adopt a systematic stage-gate process for managing innovation projects, including iterative assessments at the technical, commercial, industrial, legal, and financial levels as projects get closer to the market. Maintain discipline throughout the entire innovation process. Shortcuts often lead to disaster.
4. Early Financial Axing — Killing Ideas with the Business Case
Undoubtedly, all innovation initiatives require a financial evaluation. The mistake is rather in doing it at the wrong time or for the wrong purpose. Detailed forecasts are very useful for making decisions about industrial investments once we have all the details about a new product or process. However, they are of little use during the R&D phase because of the high degree of uncertainty. Killing an R&D project based on early financial estimates is therefore a significant barrier to innovation.
Our tip:
Don’t use early business case calculations to judge R&D projects, but rather to shape them: establish an economic framework—with parameters such as revenue, costs, and investment—to guide development teams’ experimentation and decision-making.
5. Misplaced Confidence in Our Patents — Misunderstanding IP
A patent is a powerful mechanism for protecting industrial property (IP), but we must understand exactly how it works. A patent does not provide the right to commercialize an invention, such as a new product or process, but rather the right to exclude others from doing so. This is technically known as a negative right. Understanding this distinction is important because, quite often, an invention is simultaneously protected by patents held by different owners, which means that we must check for third-party IP rights before commercializing our invention. Otherwise, we risk costly litigation.
Our tip:
Conduct a Freedom to Operate (FTO) analysis as soon as the new product or process you intend to commercialize is sufficiently defined. This will help assess whether it may infringe third-party patents and allow you to take appropriate action to manage the legal risk.
6. Organizational Myopia — The Lack of Cross-Functional Governance
Although R&D and Marketing may carry out most of the innovation work within companies, they cannot bring new products or services to market on their own. They need contributions from the rest of the organization—manufacturing, purchasing, controlling, sales, etc.—which in many cases can be quite significant. And this support is not always obvious or guaranteed. For these contributing functions, innovation can be seen as a distraction from their day-to-day business activities. If their contribution is not established upfront, project managers may struggle to secure the necessary resources. When we consider multiple projects competing for the same resources and attention, the problem can quickly become unmanageable.
Our tip:
Set up Innovation Committees, a classic but highly effective governance mechanism for a cross-functional activity involving multiple departments. They can mobilize resources and enable timely decisions at the portfolio level.
7. Innovation as an Exception — The Lack of Process Monitoring
Most internal processes in industry are standardized and systematically monitored, as this is the basis for continuous improvement and efficiency gains. Think about production, warehousing, customer service, payments, etc. However, innovation activities often receive a different, less systematic treatment. We can debate whether the high degree of uncertainty or the irregular frequency of R&D&I projects prevents companies from treating innovation as another internal business process, or, conversely, whether the lack of a structured and demanding process is what holds back innovation in companies.
Our tip:
Treat innovation as another internal business process and strive to improve its effectiveness and efficiency. Use the systematic stage-gate process described above to manage your innovation portfolio, track both your innovation efforts and the results achieved through KPIs, and, finally, analyze the data in depth to identify opportunities for improvement.
The Takeaway
Ideas, technology, and resources are crucial to industrial innovation, but they do not guarantee success. Strategic and organizational management is what makes the real difference in the outcomes of innovation initiatives.
The Industrial Innovation Process 5-40® provides a 360-degree management approach to improving innovation outcomes in companies. Get in touch with us to learn more.
