Innovation is once again a top strategic priority for the majority of companies in 2010, according to a mid-April report by The Boston Consulting Group. The report, based on a global survey of nearly 1,600 senior executives conducted in partnership with BusinessWeek, found that 84 percent of companies consider innovation "important" or "extremely important" for positioning their company to benefit from an economic recovery.

But even in good times, the innovation process can get bogged down in bureaucracy and resistance to change. When a recession leads to cost cutting, the risks associated with innovation seem to magnify.

So, how can you conquer the innovation monster in a recessionary environment?

For this edition of Expert's Corner, IMT recently picked the brain of Lisa Bodell, the founder and CEO of futurethink, a globally recognized innovation research and training firm, to get her take on innovation's role in business and competitiveness.

IMT: Innovation is often the intangible factor that enables a business to differentiate itself from all the others out there. How do you define "innovation," and how important is it to competitiveness today?

LB: "Creativity thinks up new things, but innovation does them," we like to say at futurethink. The biggest issue we see with innovation is that people think innovation is just about ideas. But it's so much more than that. Innovation is about action; creating something that is new, useful and valuable to an organization and its clients. Leading innovators continually cultivate four key competencies to be successful:

• Strategy — Setting a foundation that defines innovation objectives and mobilizes your efforts;
• Ideas — Proactively developing a stream of original ideas tied to real business objectives;
• Process — Creating a streamlined and flexible approach to shepherd innovative ideas to market; and
• Climate — Building a thriving work environment that drives innovation across your organization.

Today, especially because of the tough economic situation, most people are taking the safe or cheapest route to "being innovative" — and that's typically running an idea contest or funding a few "me too" ideas. But those companies that are still investing in R&D [research and development] and fueling their pipeline will be best prepared to leap ahead when the economy turns around. They won't have to "play catch up" because they were ahead of the game from the start.

IMT: When pressure to cut costs is especially intense, such as in a recession, R&D is often among the first to take a hit. Do you see the R&D landscape improving as the economy rebounds? What are some ways companies can focus on innovation without squashing their budget?

LB: R&D spend will most certainly bounce back as the economy improves. It has to; it's what makes organizations stand apart from their competition. Without coming up with something "new," an organization will simply have a "me too" strategy that, at best, competes on price rather than value.

But what I take note of are the companies that didn't cut back when the economy soured. These are the companies willing to invest during difficult times to get ahead when the economy turns around. Companies like P&G [Procter & Gamble] and Cisco are great examples of this.

Since you can't cost cut your way to greatness, at some point you need to focus on top-line growth even in a tough economy. A good approach to innovation doesn't focus on how much you spend, but on how you spend it. There are a few great ways to innovate and create growth for business while better mitigating risk:

• Enhance your existing products or intellectual property. For example, futurethink has a tool called 40 Opportunities, which essentially looks at an existing product or service from 40 different perspectives and challenges individuals to enhance what they have versus investing in new developments right now. Questions include: What could you remove from your product or service to create move value or create a new offering? How could you change its seasonality to lengthen its relevance? Can you make it much smaller/bigger? Looking at what you have with fresh eyes can unlock unexpected value at minimal risk.
• Explore strategic partnerships. This approach lets organizations share innovation risks and expenses while leveraging outside expertise to get to market faster. This is a popular go-to-market strategy these days with organizations that rely heavily on manufacturing for their products.
• Innovate internally. Streamline your processes, kill stupid rules, eliminate paperwork — innovation happens inside your company, too.

IMT: Innovation starts with creating an organizational culture open to breakthrough thinking. There must also be a willingness to enable employees to take new ideas and turn them into concrete actions — whether processes, products or business models. How do employers develop a culture that empowers their workers and fosters creativity and innovation?

LB: Of the four innovation capabilities mentioned earlier (Strategy, Ideas, Process and Climate), the one most critical to making innovation truly stick is climate. It's what sets the tone and gets people comfortable with taking a risk and embracing change. To lead a culture that truly supports innovation, you need a few key things:

• Lead by example. Senior leadership must walk the walk and not just give lip service to "being innovative" — this involves participating in brainstorms, championing ideas and funding pilot tests.
• Set boundaries for risk. Define for people what makes a smart risk and what makes a bad one.
• Collaborate and share. Create an environment where teams learn from other business units and exchange ideas often to get better perspective early in the development process.
• Energize teams. This involves rewarding and recognizing successes and failures along the innovation process to keep people motivated.

IMT: No longer can companies rely on being the cheapest or even the fastest ones to outdo global competition. But how do we track and measure success in terms of innovation?

LB: Companies talk about their innovation strategy and processes, but most neglect to put a solid set of metrics in place to know whether their programs are actually working (or not).

The biggest mistake we see when organizations set up metrics is that they only establish output metrics — metrics that measure the back-end outcomes of an investment. This is important, but these are "lagging" measures of effectiveness — meaning, by the time you know the results, you've already wasted too much time and money.

That's why "input" and "development" metrics are critical, too. Input metrics include things like increase in number of people participating, number of ideas in the pipeline, amount of money budgeted to innovation. Development metrics include things like time to market, number of ideas that pass each milestone effectively, and more. By tracking these metrics, as well as the output metrics, you are able to have a more immediate and complete perspective on the success of your innovation program.

Lisa Bodell is the founder and chief executive officer of futurethink, a globally recognized innovation research and training firm that helps businesses build the capabilities they need to become world-class innovators. Bodell, a pioneer in the field of innovation and learning, is a seasoned entrepreneur who has built three successful businesses. She sits on numerous boards in an advisory capacity for organizations such as the Journal of Direct, Data and Digital Marketing Practice, the Women's Congress, the Association of Professional Futurists and the prestigious Institute for Triple Helix Innovation, the only innovation initiative of its kind within the United States government. Bodell has appeared on Fox News, and in publications such as BusinessWeek, the New York Times, Wired and The Futurist.