By: Langdon Morris
The focus of the The Innovation Formula is on the innovation process that makes sense for small businesses, where lean, simple, and fast are essential. You may also be interested in a view of the innovation process that’s suited to larger companies, so this chapter provides an overview of the Innovation Master Plan framework that we use when we’re working with larger organizations on innovation projects and initiatives.
And while many of the issues and concerns of larger firms are similar or identical to smaller companies and start-ups, some are quite different. In particular, the challenges that large companies must deal with precisely as a consequence of their large size relate to innovation funding, the breadth of the innovation portfolios that they are obliged to develop, staffing for innovation as well as decision making about innovation projects, engaging very large numbers of people, and relationships with outside partners are generally different from the way that most small firms must handle these issues. But it is included here as it is often useful to see how others deal with the same issues as you’re dealing with, and similarities and differences can be illuminating.
The framework is documented in the first three books in this series, Permanent Innovation, The Innovation Master Plan, and The Chief Innovation Officer, and they’re widely read and used by leading companies, universities, and governments everywhere to help them organize the pursuit of innovation and its management as a structured, purposeful, and highly successful organizational process for business and government.
Innovation is vitally important, as we all know that all organizations must innovate to survive in these times of rapid change. Nevertheless, it remains very difficult for most organizations to achieve innovation on a consistent basis. We only have to look at the recent history of global businesses to see the impact of innovation – new and innovative companies are achieving great success, while the companies and even nations that do not innovate often fail and fall behind.
Hence, the purpose of this section is to document some key principles of innovation so you can work more effectively and productively as an innovator, and thereby contribute to a successful future for your organization.
In practice, it’s obvious that a significant part of the innovation process depends upon the creative capacity of people to come up with new and compelling ideas, while another aspect of success at innovation has to do with how we organize and conduct the innovation process from a technical and managerial perspective.
The intent of this summary is to address all of these aspects, with particular focus on the principles, tools, and methods necessary to a systematic and rigorous business process that can achieve meaningful and long lasting innovation results.
…systems thinking approach to innovation must address all six of the critical questions: Why, What, How, Who, Where, and When.
We call this an “innovation system,” and we have named it “the innovation master plan.” So to justify calling it a “system” it must be complete and comprehensive, providing valid solutions for senior leaders, middle managers, and front line workers who will work together to evoke, manage, and produce innovative results. Hence, this chapter presents an overview of a complete set of principles, concepts, methods, and tools.
While innovation is a challenge for most organizations to achieve, it’s also fun, fascinating, and very rewarding. There are few accomplishments as satisfying as seeing new ideas and decisions making a positive difference in the organization you work for.
As you learn the details of the Innovation Master Plan framework, we hope that you will develop a love for innovation, and that you will then share this love enthusiastically with others so that they, too, may experience the joys and benefits of success at innovation.
The Innovation Master Plan System is based on the concept that a comprehensive or systems thinking approach to innovation must address all six of the critical questions: Why, What, How, Who, Where, and When.
Why innovate: the link between strategy and innovation
The “why” of innovation is simple: as we examined in Chapter 2, change is accelerating, and we don’t know what’s coming in the future, which means that we must innovate to both prepare for change, and to make change in order to improve our position in the market.
As we already noted, if things didn’t change then your company could keep on doing what it’s always done, and there would be no need for innovation. If markets were stable, if customers were predictable, if competitors didn’t come up with new products and services, and if technology stayed constant, then we could all just keep going as we did yesterday.
But all the evidence shows that change is racing at you faster and faster, which means many new types of vulnerabilities. Technology advances relentlessly, altering the rules of business in all the markets that it touches, which is of course every market. Markets are not stable, customers are completely fickle, and competitors are aggressively targeting your share of the pie. So please ask yourself, “Are we managing with the realities of change in mind? And are we handing uncertainty?”
The alternatives are either to “make change” or to “be changed.”
Since the alternatives are either to “make change” or to “be changed,” and making change brings considerable advantages while being changed carries a huge load of negative consequences, then the choice isn’t really much of a choice at all. You’ve got to pursue innovation, and you’ve got to do it to obtain long lasting benefits.
The decisions to be made focus on how best to prepare for future markets, and the actions relate to transforming the innovation mindset into meaningful work throughout the organization, work that results in the development of innovations that impact the market, and improve the position of the organization relative to its competitors. This means, finally, an organization-wide commitment to designing and implementing your version of the innovation master plan.
So what we’re talking about here is the practice of innovation as a vital aspect of corporate or organizational strategy; the rest of this chapter explores how strategy and innovation are intimately linked and should be mutually reinforcing.
A tight linkage between innovation and strategy will certainly be part of your master plan, as innovation by your competitors and by your own firm causes existing products, services, and business models, and indeed entire businesses, to become obsolete. Since innovation is the driver of change, and change is the most fundamentally important driver of business strategy, then it’s not an exaggeration to say that innovation is the means of achieving strategy, as we find in the story of Apple’s turnaround from the abyss.
When Steve Jobs was asked to return to Apple as CEO in 1997 after an absence of more than ten years, the company was, to put it bluntly, a mess. If you thought that the PC market was a war between Apple and Microsoft, it was clear that Microsoft had won big.
Apple’s market share was about 5% and shrinking, and to many observers it seemed that the company was fading away. Its product line was an incoherent collection of 11 different computers, and there didn’t seem to be a clear vision guiding the company forward. The board of directors was desperate.
But did Jobs have a vision for the 21st century, as he had had in the 1970s? Did he still have the magic?
We know today that he did, but imagine that it’s 1997 and you’re Steve Jobs, and you have to figure out how to turn Apple Computer around. What do you do?
Today Apple’s share of the US PC market is growing, although it’s still less than 10%. But the iPod is the undisputed MP3 world leader, with 70% of the market, the iPhone became the world standard design for smart phones immediately upon its launch, and the iPad did the same in the tablet market. And now more than fifteen years after Jobs returned, Apple’s total market capitalization recently achieved an insider milestone when the company’s total stock value surpassed arch-rival Microsoft, and then another milestone when it became the world’s most valuable corporation.
We simply can’t imagine “Apple” without thinking about “innovation.”
To summarize, without a focused and successful effort at innovation Apple surely would not have survived; the quality of its innovative efforts led not only to survival, but leadership. Innovation was thus essential to the company’s strategy, and it was in fact how the strategy was executed, so much so that we simply can’t imagine “Apple” without thinking about “innovation.”
Innovation plays the same role for many firms
Do you admire Google? Then ask yourself what role innovation plays in Google’s strategy. It’s obvious that we wouldn’t admire Google, and in fact we wouldn’t even know about Google if it weren’t for innovation. The very existence of the company is based on a single strategic insight and on two critical innovations that made the strategy real. The insight was that as the number of web pages grew, the internet’s potential as an information resource was surpassing all other resources for scale, speed, and convenience, but it was getting progressively more difficult for people to find the information they were looking for.
People therefore came to value better search results, and Google’s first innovation to address that need was its PageRank system, developed in 1995, an algorithm for internet searches that returned better results than any other search engine at the time.
The second innovation was a business model innovation, which turned the company into a financial success along with its technical search success. When Google’s leaders realized in 2000 that they could sell advertising space at auction in conjunction with key words that Google users searched for, they unleashed a multi-billion dollar profit machine. The integration of these two innovations provided a multiplicative advantage, and Google’s competitors are falling by the wayside as the company continues to dominate.
As a result, in November 2010, Ask.com threw in the towel with only 2% of the market for internet search after trying for five years to compete with Google following its $1.85 billion acquisition by Barry Diller’s IAC/InterActiveCorp. Diller wrote, “We’ve realized in the last few years you can’t compete head on with Google.”¹
Yahoo, a much bigger company than Ask, came to the same conclusion earlier in 2010 when it decided to position itself as a media company rather than a technology company, and outsourced its search function to Microsoft’s Bing.
What other companies do you like? Do you also admire Starbucks? Or Disney? Or Toyota? Or BMW? They’re certainly innovators, and many of us appreciate them precisely because of it.
So the relationship between strategy and innovation is vital, and the important role that innovation plays in transforming the concepts of strategy into realities in the marketplace tells us that none of these companies could have succeeded without innovation. This is the “why” of innovation.
What to innovate: creating and managing innovation portfolios
Investors in all types of assets classes create portfolios to help them attain optimal returns while choosing the right level of risk, and innovation managers must do the same for the projects they’re working on.
Innovation is inherently risky. You invest money and time, possibly a lot of both, to create, explore, and develop new ideas into innovations, but regardless of how good you are, many of the resulting outputs will never earn a dime.
Is that failure or success? It could be both. The degree of failure or success will be determined not by the fate of individual ideas and projects, but by the overall success of all projects taken together. Hence, the best way to manage the risk is to create an “innovation portfolio.”
So what do you do? You allocate capital across a range of investments to obtain the best return while reducing risk, and then you manage each project aggressively to make it work.
The underlying principle of portfolio management is that the degree of risk and the potential rewards have to be considered together. In a rapidly changing market, the nature of innovation risk is inherently different than in a slower-changing industry such as, say, road construction, because the faster the rate of change in a company’s markets, the bigger the strategic risks it faces. The faster the change, the more rapidly will existing products and services become obsolete, a factor we refer to as “the burn down rate.” The faster the burn down, the more urgent is the innovation requirement.
This will necessarily affect the composition of an innovation portfolio by inducing a company to take greater risks in innovation its efforts. Hence, the ideal innovation portfolio of each organization will necessarily be different: Alibaba, Apple, NASA, Genentech, Toyota, Union Pacific, GE, and Starbucks are all innovative organizations, but when it comes to their innovation portfolios it’s obvious that they cannot be the same in content or style.
Depending on the questions at hand, senior managers may have tens or dozens of relevant portfolio views to consider.
A further key to the dynamics of a successful portfolio is described in portfolio theory, which tells us that the components of a portfolio must be non-correlated, meaning that various investments need to perform differently under a given set of economic or business conditions. In the case of innovation, “non-correlated” means that every firm needs to be working on potential innovations that address a wide range of future market possibilities in order to assure that the available options – and here is the key point – will be useful under a wide variety of possible future conditions.
The need for broad diversity in the portfolio also reminds us we need to develop all four types of innovation, so what we’re really talking about are five different portfolios. There will be a different portfolio for each type of innovation, breakthroughs, incremental innovations, new business models, and new ventures, and there will be a fifth portfolio that is an aggregate of all four. There may also be portfolios for different business units or products lines, so depending on the questions at hand, senior managers may have tens or dozens of relevant portfolio views to consider.
We should also note that each different type of portfolio will be managed in a different process, by different people, who have different business goals, and who are measured and possibly rewarded differently. Hence metrics and rewards are inherent in the concept of the portfolio, and the master plan also calls for the design of the ideal metrics by which the portfolio should be measured.
And because we’re preparing for a variety of future conditions, its obvious that some of the projects will never actually become relevant to the market, and they will therefore never return value in and of themselves. But this does not mean that they are failures; it means that we prepared for a wide range of eventualities, and some of those futures never appeared, but we were nevertheless wise to prepare in this way. This sort of “failure” is a positive enhancement of our likelihood of our survival and ultimate success, so it’s not failure in a negative sense at all. By analogy, I carry a spare tire in my car, but it’s not a failure if I never have occasion to use it.
Therefore, the process of creating and managing innovation portfolios cannot be overseen by the CFO’s office as a purely financial matter. Instead, the finance office and innovation managers are partners in the process of innovation development. Hence, innovation portfolio management is like venture capital investing, early stage investing where it’s impossible to precisely predict the winners, but nevertheless a few great successes more than make up for the many failures.
The CFO will also have to accept the idea that the mandatory investments in innovation mean investments in learning, and that during the early stages of the development of an idea its future value is almost entirely a matter of speculation.
And the CFO will also have to accept the idea that the mandatory investments in innovation mean investments in learning, and that during the early stages of the development of an idea its future value is almost entirely a matter of speculation. As work is done to refine ideas in pursuit of business value, the key to success is learning, as the learning shapes the myriad design decisions that are inevitably needed. The innovation process as a whole therefore seeks to optimize the learning that is achieved, and to capture what has been learned for the benefit of the overall innovation process as well as the portfolio management process. This costs money, which cannot and should not be avoided.
As the projects that constitute an innovation portfolio mature and develop, they provide senior executives and board level directors with increasingly attractive new investment options.
By managing their portfolios over time, a team of executives can significantly improve the portfolio’s performance; as they engage this type of thinking they get more in sync with the evolving market, and better at identifying and supporting the projects that have greatest potential.
Still, many will fail. In fact, a healthy percentage of projects should fail, because failure is an indication that the organization and particularly the innovation teams are pushing the limits of current understanding hard enough to be sure that they are extracting every last bit of value from every situation, and at the same time preparing for a broad range of unanticipated futures.
Or as TS Eliot said, “Only those who risk going too far can possibly find out how far one can go.”²
How To Innovate: the innovation process
Many people assume that creating new ideas is the beginning of the innovation process, but actually that’s not true. Ideation generally occurs in the middle of the disciplined innovation process, as we will explain here.
While the purpose of innovation is “simply” to create business value (simply is in quotes because it’s obviously not so easy to do), the value itself can take many different forms. As we noted above, it can be incremental improvements to existing products, the creation of breakthroughs such as entirely new products and services, cost reductions, efficiency improvements, new business models, new ventures, and countless other forms as well.
No matter what type of innovation we’re talking about, the method of creating innovation is to discover, create, and develop ideas, to refine them into useful forms, and to use them to earn profits, increase efficiency, and/or reduce costs. Here we focus on how to do that, the process of innovation itself.
In the quest for innovation it’s obvious that many ideas at the input stage become a few completed, useful innovations at the output stage, so people readily visualize the innovation process as a funnel: lots of ideas come in the wide end on the top, and a few finished innovations come to market from the narrow end below. The trick to making it work is knowing what’s supposed happen inside the funnel.
So naturally you want to start by creating a whole bunch of ideas, right? Actually, no.
Ideas are indeed the seeds of innovation, just as ore taken from the ground is the raw material of steel, or waving fields of wheat provide the raw material for bread. But it takes a lot of work to mine the raw ore and transform it into steel, or to prepare the fields to grow the wheat long before it becomes bread. It’s the same with innovation; we don’t start by collecting raw ideas. Instead, we know that innovation is a core element of our organization’s strategy, so we have to start the innovation process itself with strategic thinking to assure that the outputs of innovation are fully aligned with our strategic intent.
Step 1 is therefore Strategic Thinking. The innovation process begins with the goal to create strategic advantage in the marketplace, so in this stage we think specifically about how innovation is going to add value to your strategic intents, and we target the areas where innovation has the greatest potential to provide strategic advantage. This was the topic of phase 1 described above, the “why” of innovation.
Step 2 is Portfolio Management & Metrics. As we discovered in phase 2 on the “what,” one of the important underlying facts of innovation management is the necessity of failure. We are by definition trying to do something new, and as we proceed on the innovation journey we do not in fact know if we are going to succeed. We have confidence that we’ll succeed eventually, but along the way we know that there will be many wrong turns, and many attempts that will never come to fruition. So we manage innovation portfolios aggressively to balance the inherent risks of the unknown with the targeted rewards of success, and balancing our pursuit of the ideal with the realities of learning, risking, failing in order to ultimately succeed.
Steps 1 and 2 together provide a platform and context for everything that follows, and so they constitute the ‘Input’ stages of the funnel, and so that the activities in the following stages have the best chance to achieve the best results.
Step 3 is Research. An output of Stage 2 is the design of the ideal innovation portfolio, which is what we believe, as of today, is the right mixture of short and long term projects across all four types of innovation. Once we understand the ideal we can compare our current knowledge and discern the gaps. Filling these gaps, then, is the purpose of research. Through research we will master a wide range of unknowns, including emerging technologies, societal change, and customer values, and in the process we will expose significant new opportunities for innovation.
Strategic thinking has clarified for us how the world is changing and what our customers may value, and this stimulates new questions that our research has answered. Research findings provoke a broad range of new ideas across a wide range of internal and external topics. This is the abundant raw material, and it is already and automatically aligned with our strategic intent because it came about as a result of a direct connection between strategy, portfolio design, and research.
Step 4 is Insight. In the course of our explorations, the light bulb occasionally illuminates very brightly, and we grasp the very best ways address a future possibility. Eureka! The innovation and the target and mutually clarified; we understand what the right value proposition is for the right customer.
While many people think of this moment of insight as the beginning of the innovation process, as you can see, in the well managed innovation effort we expect insight to come about as the result of the preceding processes and activities, not at random.
Hence, the innovation process described here is specifically contrasted with random idea generation; insight is the result of a dedicated process of examination and development. It doesn’t occur because someone had a good idea in the shower, but because individuals and teams of people were looking diligently and persistently for it.
Step 5 is Innovation Development, the process of design, engineering, prototyping, and testing that results in finished product, service, and business designs. Manufacturing, distribution, branding, marketing, and sales are also designed in at this step, in an integrated, multi-disciplinary process.
Step 6 is Market Development, the universal business planning process that begins with brand identification and development, continues through the preparation of customers to understand and choose this innovation and leads to rapid sales growth.
Step 7 is Selling, the where the real payoff is achieved. Now we earn the financial return by successfully selling the new products and services. In the case of process improvement innovations directed internally, we now reap the benefit of increased efficiency and productivity.
Managing a process of this scope and complexity is of course a challenge for all organizations, but among the world’s companies we see that there are some that do this extraordinarily well. The knowledge that some do it very well, and that it’s certainly possible to be an exemplary innovative organization that can attain exceptional profits, should be a powerful source of motivation to develop and apply your own master plan.
Who Innovates: creating the innovation culture
Organizations that are successful at innovation naturally develop a strong innovation culture. But supposing an innovation culture doesn’t yet exist in your organization. Then how can you develop it?
Such a culture is much appreciated by customers who say that the company is a genuine innovator, and it’s also known among the people inside the organization as a dynamic and innovation-friendly place to be.
But supposing an innovation culture doesn’t yet exist in your organization. Then how can you nurture it? How do organizations develop an innovation culture? Who should be involved in the innovation process? And what roles should they play?
Every culture is an expression of behaviors and attitudes, and every organization’s culture reflects the beliefs and actions of its people, as well as the history that shaped them. The innovation culture, of course, is likewise an expression of people, their past, and their current beliefs, ideas, behaviors, and actions about innovation.
We have found that the innovation culture comes into being when people throughout the organization actively engage in promoting and supporting innovation, implementing rigorous innovation methods, and filling three essential roles: Creative Geniuses, Innovation Champions, and Innovation Leaders. In this respect, the approaches that are suited for large companies are identical to those of small business: it’s all about defining the right roles, and getting the right people to fill them.
Innovation’s Creative Geniuses
Who comes up with the critical ideas that are the beginnings of innovation, and then turns these ideas into insights, and insights into innovations? They are Creative Geniuses, and they work everywhere, inside and outside.
If it seems like a stretch to label these people as “geniuses,” let me explain the rationale. No one can innovate if they accept things the way they are today, so making innovations requires that we are willing to see things differently. We have to overcome institutional and bureaucratic inertia that may burden our thinking process, and challenge ourselves to see beyond conventional viewpoints. This fits perfectly with the dictionary definition of genius, which is “exceptional natural capacity shown in creative and original work.”
Innovation Managers (also referred to as “Innovation Champions”) are those who promote, encourage, prod, support, and drive innovation in their organizations. They do this in spontaneous moments of insight, in ad-hoc initiatives, as well as in highly structured innovation programs.
Innovation manager/champions build the practical means for effective, systematic innovation. They take direct responsibility for finding creative thinkers and encouraging them to see and work in new ways; they help people seek new experiences that may spark new ideas; and they create a regular operations context in which sharing and developing new ideas is the norm.
While they may work anywhere in the organization, including in senior management positions, line management roles, staff, or front line operations roles, the specific nature of the champion’s role is to function in the middle, to provide the bridge between the strategic decisions of senior managers and the day to day focus of front line workers.
An Innovation Leader is someone who shapes or influences the core structures and the basic operations of an organization, all with a clear focus on supporting innovation.
Core structures include the design of the organization itself, as well as its policies and their underlying principles. Metrics and rewards can also be core structures.
None of these factors are absolute givens, and all of them can be changed, and that’s the point: they are all subject to design, to thoughtful choice about what is best. It’s generally within the power of senior managers to change them, and when they impede innovation they should be changed to favor it.
…all of these factors can be done in a way that makes innovation easier or more difficult, because each can be arranged to favor the status quo or to favor useful and effective change.
The actions and attitudes of senior managers are based, ultimately, on their philosophies about management, on their mindset, which we explored earlier in this document. Innovation leaders set expectations, define priorities, celebrate and reward successes, and deal with failures, and all of these factors can be done in a way that makes innovation easier or more difficult, because each can be arranged to favor the status quo or to favor useful and effective change.
Do leaders believe in a win-win model, or win-lose? Win-lose organizations usually are not trusting environments, and because trust is so important to innovation, when it’s missing innovation suffers.
Leaders also set goals, and they don’t need to be modest; in fact they can be outright aggressive. By setting ambitious goals, managers emphasize the linkage between an organization’s strategy and the pursuit of innovation, elevating innovation to a strategic concern where it properly belongs. Conversely, if innovation is not expressed as a specific goal of top management then it probably won’t be a goal of anyone else, either; and if policies are restrictive and make it difficult to test new ideas, then there won’t be many new ideas. We refer to organizations that are focused on the present, rather than the future, as “status quo organizations.”
The firm that’s obsessed with the status quo probably won’t last very long, but some managers still seem to believe in this model, and their domineering attitudes and behaviors reinforce it.
Innovation doesn’t happen without leaders who embrace it, nor can it happen without people who have ideas and are willing to risk failure to experiment with them. Nor does it happen without champions to bridge between the strategic and the operational questions, and the individuals who have ideas and want to explore them.
And of course it happens best, and fastest, when all three roles are consciously implemented and mutually supporting. This does not mean that each individual can play only one of these roles; many people are geniuses, and leaders, and champions, and at various times we play all of these roles.
So what is important is not that we classify people into the various categories; in fact, we should avoid doing that. We just need make sure that all three roles are being played, and played well, so that defining, developing, and implementing ideas that become innovations becomes the norm.
Where We Innovate: the innovation infrastructure
What are the essential elements of infrastructure and tools to support the innovation process? There are four key parts of this infrastructure, the same ones we identified in the previous chapter. How large companies implement these tools will be different than small businesses simply because of the larger scale that they must address, but the core needs and intents are the same.
Organizations that consistently deliver innovation do so because their employees have the skills to effectively explore, understand, diagnose, analyze, model, create, invent, solve, communicate, and implement concepts, ideas, and insights. These are all attributes that we might consider facets of “learning,” and naturally enough any organization that thrives in a rapidly changing environment necessarily has developed the capability to learn and to apply that learning to keep up with external changes.
Certainly the link between learning and innovation is a strong one, and clearly speed matters. The faster people in a company can learn, the faster they can apply that learning to create the next product, service and business model. By creating a positive and self-reinforcing feedback loop of accelerated learning to create innovation, organizations then obtain more learning, leading to more innovation. The results are manifold: shorter product life cycles, which leads to quicker learning, yet shorter product life cycles, better profits, etc., all contributing to competitive advantage.
To support the acceleration of learning and innovation we have found that the proper infrastructure tools make a big difference. The four key infrastructure elements are open innovation, effective collaboration, the virtual workplace, and the design of the physical work place; here is a quick summary paragraph about each.
While in the past many organizations kept the innovation process closely guarded as an in house secret, these same companies have recently discovered that seeking new product ideas from outside can significantly improve the flow of new opportunities. Applying the principles of open innovation can significantly accelerate the pace of innovation, as well as its effectiveness. Open innovation means expanding the pool of participants in the innovation process to all types of outsiders, including customers, suppliers, partners, and community members, tapping into ideas, critical thinking, and advice.
Everyone who works in the field of innovation agrees that collaboration is vital to success at innovation. Mastering and applying the principles of effective collaboration, not only for pairs and small groups, but also for groups of tens or even hundreds of people requires facilitation skills to help nurture new ideas and turn them into effective innovation, and the benefits can be significant.
The virtual work place
As we spend more and more time working and collaborating on line with our internal colleagues and with outside partners, customers, and vendors, the quality of our tools and our skill in using them can make a significant difference in the productivity of our innovation efforts. Active engagement in the selection and adoption of the right tools is a simple but fundamental rule to follow.
The physical work place
As MIT Professor Tom Allen puts it in the lively book he co- authored with architect Gunter Henn called The Organization and Architecture of Innovation, “Most managers will likely acknowledge the critical role played by organizational structure in the innovation process, but few understand that physical space is equally important. It has tremendous influence on how and where communication takes place, on the quality of that communication, and on the movements – and hence, all interactions – of people within an organization. In fact, some of the most prevalent design elements of buildings nearly shut down the opportunities for the organizations that work within their walls to thrive and innovate. Hence, the implications of physical space for the innovation process are profound.”
The essentials for effective innovation are thinking, creating, problem-solving, and collaborating, and we know that the work place that best supports them is not a traditional conference room, but a mush better work environment that is designed for innovation.
These four elements, open innovation, collaboration, the virtual workplace, and the physical workplace constitute the critical elements of the innovation infrastructure, and it is by providing these tools to the innovative people in your organization that you can help them do their best to develop the innovations that will compose your organization’s future.
Summary of the innovation master plan
Your innovation master plan will cover each five of the major elements in great depth.
To enable the development of your plan, it’s often helpful to conduct a comprehensive review of your organization’s performance as an innovator to clearly identify what’s working well and what’s not working at all, and to design the corrections. (This is one reason why, by the way, we consider “designer” to be one of your essential skills.)
We have found that there are seven technical factors that are critical to innovation performance, as well as seven additional factors that are cultural.
7 technical factors
We refer to these as technical because they can be assessed in a relatively objective fashion, and according to specific technical criteria.
- Alignment of Strategy and Innovation
You’ll describe how you intend to align the innovation process with the strategy process.
- Innovation Portfolio Management
You’ll assess the contents of the existing innovation portfolios to see if they have the right balance of incremental and breakthrough projects, and to asses the projects that are underway to determine if they really are the right future products and services for the organization to make and sell.
The purpose of assessing the research process is to determine how well it’s capturing the critical tacit knowledge that will feed the search for unknown and unmet needs.
- Innovation Development
You’ll evaluate the development process as well, to make sure that innovation development and market development are proceeding effectively and in parallel, and providing the right guidance for the organization.
- Alignment with Sales
You’ll make sure that the new products and services that are being introduced are effectively aligned with the sales organization so that the organization can in fact bring these products and services to market effectively.
- Innovation Metrics and Rewards
You’ll determine which innovation metrics should be used throughout each stage of the innovation process, and make sure that those innovation metrics are aligned with the rewards that are offered to individuals, teams, departments, and business units.
And you’ll examine the infrastructure to determine whether the people who are working in the innovation process have sufficient information and support to complete their work as efficiently as possible.
Wherever a stage of the process or a critical skill is not at the level it ought to be, or if it’s missing entirely, you’ll design an improvement plan or a process to implement it from scratch.
7 cultural factors
Assessing these factors will perhaps lead you into a more subjective dialog than the assessment of the technical factors, but they are nevertheless critical to effective innovation performance as well, and you should conduct a robust study of them.
- Innovation Culture
A critical issue, of course, is the character of the organization’s culture. Does it favor innovation, or shun it? Do people feel safe in taking risks, or is this a career-threatening move, and something which is consistently avoided? Do people embrace the characteristics and qualities of the innovation culture, or is it an organization that seeks the status quo culture?
You’ll assess the creativity of people throughout the organization to see if the new ideas that are under development are sufficiently creative.
You’ll examine the level of trust in the organization to see if people are comfortable in their working relationships to allow the ambiguities and uncertainties of the innovation process to follow a natural developmental flow, or if the lack of trust forces people to make innovation decisions too quickly because it’s not safe to allow ambiguity to resolve itself over time.
You’ll assess the performance of leadership across the four delivery factors, including goal setting, expectation setting, and tone setting.
- MindsetYou’ll assess the mindset of the leadership team to see how well they understand the acceleration of change, and how much they’re prepared to support the innovation process as the development of the future products and services for the company.
You’ll review the overall attitude that people have towards innovation to find out if innovation is sufficiently support, and if people are engaged in the innovation process.
And of course, you’ll look at the tone as defined as said by senior leadership to see that innovation is getting the proper support in both words and actions.
A thorough assessment involves talking with a lot of people, and not just people in top management, but people throughout the organization. You may also interview people who are outside, including customers, suppliers, and partners, to learn their views on the company’s innovation performance, strengths, and weaknesses. Interviews often last 30 to 60 minutes, although they could also be longer.
Researching the external environment measures the rate of change in the market, and assesses the innovation capabilities and performance of major competitors.
To learn the views and experiences of a larger group of people it’s helpful to do an online survey to reach hundreds more people. Ten to twenty minutes of questions and answers, answered anonymously and therefore candidly, provide tremendous depth of information about people’s attitudes, feelings and experiences of the innovation process.
By comparing findings across all three of these information sources we expect to gain a detailed understanding of current innovation performance, assess where performance is outstanding, where it’s good, and where it needs to be improved, and where it should be targeted.
Your innovation master plan
You may choose to write up your findings in a plan, and it will certainly also be the subject of a briefing with your executive team to help them understand the organization’s current capabilities, prescriptions, and the role that each member of the executive team needs to play in developing and promoting the dramatically enhanced innovation capability that you envision, the transformation of your organization into a genuine innovator.
As you prepare the innovation master plan you should expect to identify ten to twenty major improvement areas to focus on, and these may become the primary drivers of your innovation action plan for the first six months to one year. You can also expect that during the course of that work you’ll be interacting with a great many people, and both coaching and encouraging them to participate in the innovation process, as well as for many insisting that they follow the rigorous innovation structure.
As you will certainly have noticed, a lot of this overlaps with your needs as a small business leader, but the scale of the ideation effort that a large firm has to engage in, and the scale of the infrastructure to support the financial, managerial, and coordination of all that is probably far more than you need.
And in fact, the very idea of a Master Plan may be beyond the scale or scope of your requirements. But at the same time it’s necessary to plan thoughtfully and engage people effectively as you pursue innovations to support your own business’ future growth and development.
And of course the advantage that you’re likely to have over a larger firm is the capacity to act quickly. As the leader of a small company, when you want to move forward you can make a lot of great stuff happen very fast, while bigger firms may spend weeks, or months, or even years debating; that can yield you a significant head start.
This means taking action, and in the next chapter we’ll look specifically at your own action plan.
The Innovation Formula: the guidebook to innovation for small business leaders and entrepreneurs
1. Innovation in the SME and Entrepreneurial Context
2. Elements of The Innovation Formula
3. Five Forces of Complexity and Change
4. Market Mapping for Sustainable Growth
5. Risk, Great Ideas, and Your Business Model
6. Risk and Your Innovation Portfolio
7. Designing Your Innovation Portfolio
8. Build a Fast and Efficient Innovation Team
9. Speed of Innovation – How to Master Rapid Prototyping
10. Full Team Engagement in the Innovation Culture
11. To be a Good Leader, Be a Good Learner
12. Key Abilities of Effective Innovation Leaders
13. Four Tools to Support Creativity and Innovation
14. → Taking Action: Your Innovation Master Plan
15. 25 Steps to Jump-Start your Innovation Journey
About the author:
Since 2001, Langdon Morris has led the innovation consulting practice of InnovationLabs LLC, where he is a senior partner and co-founder. He is also a partner of FutureLab Consulting. He is recognized as one the world’s leading thinkers and consultants on innovation, and his original and ground-breaking work has been adopted by corporations and universities on every continent to help them improve their innovation processes and the results they achieve. His recent works Agile Innovation, The Innovation Master Plan and Permanent Innovation are recognized as three of the leading innovation books of the last 5 years.
- San Francisco Chronicle, “Ask.com layoffs spell surrender.” November 10, 2010
- ST.S. Eliot, Preface to Harry Crosby, Transit of Venus (1931), p. ix.