For regular newsletter readers, we are four steps into a five-post series on developing a cross-functional innovation team that can deliver. To provide sufficient context for the final post, I am going to take this opportunity to do a higher-level briefing on innovation systems. If you missed the previous posts in this series, you can find the first one here. Also, if you are reading this on LI or Twitter, you are reading only one third of a monthly newsletter filled with useful advice for innovators. If you’d like to receive the full newsletter, please sign up in the orange box to the right.
The modern organization must have an innovation culture that permeates every facet of its operations. Having had the privilege of working with a dozen business models in 22 countries, and having studied the art in some of the best innovation programs, I have gained the following perspective:
An effective innovation system must be relied on to do heavy lifting, allowing the organization to identify and incorporate initially ambiguous, high potential actions and move them into operations in a way that honors stewardship and the mission of the firm.
Using this perspective, I have synthesized an approachable framework for leaders and firms that I use in my speaking and consulting work. In this system, there are four key elements to a comprehensive innovation program that need to be present to have a consistently high ROI pipeline of innovation. If you have a gap in any of these systems, there will be shortfalls in growth and shareholder returns for your firm.
#1: Developing Insight
Great innovation starts with developing specific insights that will allow you to have a unique vantage point to resource and build workstreams ahead of other firms in your industry.
I like Rumelt’s comment regarding the battle over insights:
“Business competition is not just a battle of strength and wills; it is also a competition over insights and competencies.”
This is an underemphasized part of the innovation journey, and trouble in the later stages can often be traced to a lack of ideas that have sufficient ability to create outsized returns for the firm. More specifically, a common issue for many firms is loading the innovation pipeline with low risk, lower value incremental changes.
Rather than being a “fairy dust” set of activities, there are systematic methods of scanning the environment for those changes that are in the blind spot of your firm and the competition.
The best firms have a calendar driven environmental scan that uses outsiders to surface trends and ideas that are not on the core team’s radar. Firms who do this well have baked data gathering into all their interactions, including senior leader meet and greets with customers and partners, supply chain strategic partner meetings and customer road map sessions. All these interactions include questions along the lines of, “what has changed or surprised us in the last 180 days?” A great practice is to have a regular meeting of select customers, led by them, to provide an advisory function for the firm. I have taken part in “visionary” panels, where we purposely reach beyond the boundaries of the industry for other changes and best practices that we can apply.
I’m partial to what I call the Growth Zone, a variation of Ansoff’s Matrix, that I have used successfully with a number of clients as a tool to create a directed scan.
The feedback from these sessions is consistently gathered and aggregated into a working list of ideas and contrarian viewpoints, providing a rich source of projects and programs.
#2: Describing Those Ideas
This step begins the journey of describing the concept in the three modes that are absolutely necessary for the trip from ambiguity to ROI: visually, in narrative and analytically. I have described these tools in detail here. The goal of this phase is to move from a line item description to a 3-5 page brief that brings more richness, depth and specificity to the program.
Taking your insights from the previous step and skillfully wrapping them into a package that allows them to be efficiently tested and improved is the key part of this step. The most significant step forward in this area is the recognition that firms have a dismal track record of doing this without outside information from customers, partners and suppliers. This has resulted in a tremendous amount of great work in this space including tools like Lean Innovation (Ries), the Business Model Canvas & Value Proposition Design (Osterwalder), The First Mile (Anthony) and Ten Types of Innovation (Keeley).
Best practice here is to regularly aggregate key ideas from Step 1 and apply the process tools lightly to allow the idea or concept to be understood and tested externally. This may involve sketches, simple prototypes (one author talks about Google Glasses being prototyped by using a coat hanger, a sheet protector, a pico projector and a notebook computer). Using an incomplete looking prototype can actually enable more interaction because it shows the evaluator that you are really looking for feedback and are open to changes. A device or prototype that is too “slick” can shut this process down.
The goal of this phase is to have more than three (but less than 10) key fleshed out ideas per calendar cycle that can be taken into a deeper due diligence process.
#3: Deciding Which Innovations to Gate
I have written a five-post series about innovation decision making here, and now it’s time to apply our best “whole-brained” approach to making selections and final refinements (frequently called pivots). This is one of the most pivotal gates in any firm, and the key question here is, “how do you decide which programs receive deep due diligence and refinement?”
We are now at the point where we are going to short list the key innovation candidates from Step 2 and make a decision to do a deep dive and apply resources to fully vet them prior to scale. There are two ways that organizations can go wrong here: either by allowing only low-risk innovation programs or allowing too many high-risk programs into the organization at large. A firm must have a clear grasp of its innovation capacity to make sure it does not overload the firm and prevent it from getting anything done. Innovation projects need to be built into the resource base of the firm, and placing too much in the pipeline simply slows execution to a crawl. In making this trade off, think about not only cash, but also management bandwidth, key critical human resources and prototype equipment loading.
Again, this is a place where much current work is being published. See the books by Rita Gunther McGrath, for example.
#4: Deploying the Innovation
This, too, is an underappreciated part of the innovation process. Once the commitment is made to scale the innovation, everything changes.
The people who are skilled in the first three stages are usually the wrong candidates to take innovation to scale.
This is the time to fully activate the cross-functional team I have been writing about in this series by making sure all key stakeholder groups are represented. You’ll also want to ensure the team is well run and has sufficient line of sight to top management to avoid pocket vetoes from occurring. The best practice here is to move the innovator to consultant and appoint an operational leader that has run this gauntlet before, or to make sure the leader has the council of someone skilled in large-scale organizational change. The main question here is: “how do you structure an implementation team to deliver on the promise?”
Wrap Up Application Questions:
- Is your innovation system delivering consistent stakeholder returns? Are you confident enough to put innovation in your operating plan or is it a “bluebird”?
- On a one-to-five scale, how would you score your firm on each of the four key elements I have outlined above?
- If a recent program has fallen short, which one of the four steps would have allowed the project to either be killed earlier, or changed to improve its outcome?
- Do you have a process that develops clear line of sight across the boundaries described above? Who is watching over the entire innovation pipeline for your firm? How often do they report out to the management board?
The best organizations set all these pieces on a firm foundation of strong leadership and well developed focus.
I would love to get your feedback on the above – please email or tweet me @scottpropp.
If you’re looking to accelerate innovation using your existing resources, I invite you to take advantage of my offer for a complimentary 20-minute coaching call. No hard sell, we’ll roll up our sleeves and get right to it.
Sound good?
To schedule a time, please send an email with “complimentary call” in the subject line. Keep in mind that while I always leave room in my agenda to meet new people, the demands of my coaching, consulting work and speaking engagements make for a full schedule. Rest assured that I value your interest and look forward to speaking with you as soon as possible.
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