Innovation audits are an idea that reveals where innovation competence and innovation weakness shows up in a firm. So we're going to look at how innovation audits work. So, first let's identify what it is. An innovation audit is an in-depth analysis of the firm's innovation capability and the processes that get the innovation out the door and into the marketplace. And you look at key indicators, you look at strengths, you look at weaknesses about the innovation process. And the innovation results, the audit results, should reveal barriers to getting an innovation done, and reveal potential improvements or methods that can enhance innovation capabilities. And so the innovation audit has a purpose, it has a function, and helps reveal opportunities and identifies barriers to innovation. So, the three fundamental questions that an innovation audit addresses are, what's the innovation track record for the firm? How much has been done? How much innovation has actually occurred over a period of time? Could be a year, could be five years. And, how good is the fit between the firm's current business strategy and the current innovation capability. So sometimes you don't get alignment between what the firm is actually doing and the capability that it actually has. Sometimes firms can be very innovative in some areas, but not be directed in their strategy direction in the same way that is reinforced by their Innovation capabilities. And so the third question here is, what innovation capacity does the firm need to actually support its growth and competitive position in the marketplace? So this is a benchmark, if you can identify what your competitors are doing and what you need to do to remain competitive by being innovative, that's what the innovation audit helps reveal. So here's a picture of the main parts of an innovation audit. And it really starts with inputs on the left hand side and has outputs on the right hand side. But you can see that one of the main component is an innovation strategy and on the bottom you can see the culture and structure and organization of the firm is another element. And so in between, you look at innovation processes and roles and how the innovation portfolio is actually managed, and then you also look at how ideals and knowledge are managed. And so these are the things that get analyzed in an innovation audit that have an effect on the outputs and the results of an innovation. So we look at for instance, current innovation patterns. What's the firm's history? Has it got a track record of innovation, and has it done things that can be repeated? And are those things that have been repeated always been successful? Are there ways to improve that? And are there actual formal innovation process steps in place? And who is serving in these innovation roles? So, by identifying gaps in either role identity or gaps in steps that might be missing in the innovation process, you can begin to get apt what could be improved in a firm's innovation process. Another point in an innovation audit, is to look at the level of commitment that the firm has to innovation. Now, one thing to say that like most firms do, we're very innovative in what we do, you have it in the mission statement. But it's the result of what commitments they make to time and resources that are devoted to innovation that reveal what their commitment to innovation actually is. And by looking at the amount of time and resources that are devoted to innovation, you can also look at the business areas, the functions that receive innovation attention. And so, the resource allocation actually reveals the level of support for innovation. And so, another point in the innovation audit is awareness of innovation. And by awareness we mean, what does the firm know about what's going on outside of it in the competitive environment that it's operating in? And so by doing that, you need to look at and you need to audit what forms of environmental scanning do they have, and how well equipped are the staff that is doing this environmental scanning, and how aware are they of what the innovation activity is in other industry sectors that are related to the competitors on their market? And finally, how well informed is the firm about business intelligence of its competitors innovation activity? How well do people know, in the firm, what competitors are doing that's innovative? And unless you know that, you don't know how well you can keep in pace, and keep in step with your competitors. Idea generation capacity is another main function that innovative firms do. And is there a formal process in place? And does this formal process actually stimulate any new product or service ideas? You can measure that, you can track that. And if you explore the potential application of new technologies, you can ask whether that's been done. And you can identify potential cost saving methods and internal process efficiencies as well. So, ideas have results. They result new products, new services, and cost-saving methods, and process efficiencies, and you can identify these things. So, and once you know whether ideas are being generated, then you have to say, if it's one thing to have a suggestion box full of ideas but it's quite another to be able to evaluate them and to know where they might be applicable. And so in idea evaluation, you ask how do ideas and proposals for innovative initiatives gets screened and evaluated? Is there a process for that? And if there is, how is it working? How many ideas are actually getting screened and evaluated? And this a process actually supported with a staff and resources and incentives for proposing those new ideas? Another point in the audit is to look at the level of innovative culture. As we saw in that diagram, an innovative culture is a very key element to being innovative in a firm. And so you'll look at what are the indicators of support for spawning innovative initiatives? Are there informal networks of creative employees within the firm? And are these informal networks really communicating with each other and are they building a knowledge base that can help sponsor innovation? And is their community practice actually focused on innovative approaches? Are there people whose jobs it is to look for innovation opportunities specifically within the firm, and outside the firm? Opportunity finding and tracking is another element that is examined in an innovation audit. And you look at how active the firm is in spotting new opportunities for innovation. And this relates to how it does environmental scanning, how well it actually filters that knowledge, and how well it translates those opportunities into actual captured and documented opportunities that lead to an innovation. And you look at what forms of staff development and support are available for opportunity finding? Is there a staff that actually does this and what kind of support is it being received? And finally, you look at the innovation track record. How frequently does the firm actually apply innovative ideas to its products and work processes? Is there some acknowledgement of that and what proportion of these have actually been successfully innovated? When they're carried out and implemented, that is a measure of how successful that track record could be. And then you can ask, what effect has their implementation had on the firm's core competencies. If there has been a successful implementation or even if there hasn't been a successful implementation, it would reveal what's missing, in terms of the firm's core competencies. And so here we have a process view of an innovation audit. It's the elements on the left hand side, where there is the force of environmental change which is the, let's say outside the firm. And, some on the bottom you can see some force that is an internal proposal for some form of innovation and there's some decision making process. And the decision making process looks it how aligned that idea is with the firm's mission and its purpose and its competition. And then the larger box really goes through all of the elements that get audited. And out of that audit, you look at whether or not you need new competencies, whether or not you might have some new innovation ideas that might fit into a innovation portfolio. And then on the top, on the path toward results, you look at whether or not you've got the resources and the competencies, and whether you've got the business savvy to actually reach some solid results. So some takeaways about an innovation audit is that innovation audits actually help determine whether a firm is innovating in the right areas and whether those opportunities are ones that are being missed or being taken advantage of. And sometimes an innovation audit will reveal barriers to innovation and where they are identified, how does the innovation competence that is missing actually show up. And finally, having an overall picture of a firm's innovation competence actually enables a clear alignment to it's innovation initiatives. And the way to get at that is by doing an innovation audit in a firm.
