Note: This is part of a series of posts explaining the individual parts of The Innovation Matrix. See this post for a description of the full model and what can be done with it.
Fit for Purpose and World Class Innovators
In a perfect world, as firms increase their Innovation Competence, their Innovation Commitment, should increase at the same rate. A mismatch between the levels of Innovation Commitment and Competence leads to an unstable state. If you are highly committed to innovation, but still not very good at it, it leads to frustration, cynicism, and the perception of wasted effort. On the other hand, if your Innovation Competence is high, but you are not very committed to innovating, then it is very likely that your success will fade over time due to lack of innovation process.
This means that there are three stable states in the innovation matrix: Not Innovating Very Much, Fit for Purpose, and World Class Innovators.
Earlier, I outlined the circumstances in which it is a reasonable to strategy to be Not Innovating Very Much. The identifying characteristics of firms in this square is that there isn’t much going innovation-wise. There is little Innovation Commitment, so there aren’t really any processes in place to support innovation. And there is also little Innovation Competence, so there aren’t too many new ideas being executed either.
Firms that are Fit for Purpose are better. They share all of the characteristics described for firms that are Thinking About Innovation, but they are significantly better at executing ideas. In practice, this means that they are probably reasonably good at the idea management process. They have the ability to capture ideas, the have a process for selecting the best ones, they can execute the ideas, and they can get them to spread.
Firms that are World Class Innovators up the ante in both categories. They are more committed to Innovation. This means that they have a full complement of processes in place to support innovation. And they are outstanding at executing ideas, they undertake different forms of innovation – not just innovating new products, the do both incremental and more radical innovation, and they manage a portfolio of different innovation efforts across multiple time horizons.
The examples of World Class Innovators are not always obvious. Of course there are firms like Google, Apple, and Procter & Gamble. But John and I have run across some much smaller firms that do pretty well too. You don’t have to be a huge multinational to fit into this category.
The firms that are Fit for Purpose are even harder to find. They are usually not undertaking innovation that grabs your attention. But they still consistently seem to come up with interesting new ideas that they have executed. A good example here is probably Microsoft.
Microsoft’s major innovation in the 1980s was actually their modular business model structure. Since then, most of the things that they have introduced originated somewhere else. However, to integrate ideas that arrive through collaborations or acquisitions still requires quite a bit of internal innovation skill.
The first strategy to pursue is to concentrate your innovation efforts on whatever makes you distinctive. This is where the linkage between innovation and your overall strategy is crucial. If you are in either of the Fit for Purpose or the World Class Innovator categories, then your innovation effort and your innovation output are pretty well balanced. This is good. The critical question to ask then is: which of the two categories do we need to be in?
My answer would be: if you are differentiating yourself on innovation, then you need to be a World Class Innovator. However, if your point of difference is something else, then you just need to be Fit for Purpose, but you need to focus most of your innovation efforts on whatever your point of difference is.
Take a look again at the diagram that John uses a lot:
If you use this framework, then you can use best practice approaches to meet the minimum required levels in whichever areas you’re not concentrating. The one that makes you distinctive, however, is where you need to innovate. This is true both for Fit for Purpose and for World Class Innovators.
The second point is that for both of these, you need to have absorptive capacity. Absorptive capacity is one of those ugly academic terms that is actually fairly useful. Paul Hobcraft does an excellent job of explaining it, and you should check out his post. The official description is a firm’s “ability to recognize the value of new, external information (knowledge), assimilate it, and apply it to commercial ends.”
Research on absorptive capacity has consistently shown that in order to take advantage of good ideas that come from outside of your firm, you have to good at generating and executing good ideas inside the firm already. This point is critically important if you are looking into open innovation as a strategy, and it is especially important for firms that are Fit for Purpose. Here, you are often relying on adapting ideas that others have come up with – but in order to do this you need to have enough absorptive capacity to recognise good ideas, and to be able to execute them effectively.
So the prescription for firms in these two boxes is this:
- First, determine if your innovation capability is adequate for whatever strategy you are trying to execute.
- If it is, then keep doing what you’re doing.
- If you’re a Fit for Purpose Innovator that wants to move up to World Class, then you have to devise steps that will get you there. The first place to look is at both your Innovation Commitment and your Innovation Competence to find your current gaps. Then figure out which skills you need to add, and in what order. Then do it.
The good news about both of these categories is that they are stable. As long as your environment is stable, then you will be fine if you just keep doing what you’re doing. If your environment is changing rapidly, then you might want to think about how to become a World Class Innovator, because the best way to deal with uncertainty is to create the future yourself.