If you google “innovation,” you get more than 417 million results. If you narrow it down to “Innovation Management” you knock that number down to 3,160,000 results.
On amazon, you get 228,716 hits for “Innovation.” 54,485 of those are in Books. You can cut the number down to 1,330 in the Patio, Lawns & Garden category, but that probably doesn’t do you much good.
If you’re trying to make your organisation more innovative, how can you navigate all of the available resources?
That’s one of the problems that I’ve been trying to solve with The Innovation Matrix. It’s changed a lot since the last time you’ve seen it. I’ve been using my Artefact Cards to help figure out how things work.
First up, the big news: I’m collaborating on this now with Nilofer Merchant! She and I are developing the ideas together, and as we start to roll them out in earnest, you’ll see some big differences. She explains what we’re up to here:
It is an idea that when developed could help any organization figure out where they are, and the moves to take based on where they want to be.
We’ll be sharing as we go. Which means anyone — quite possibly you — will have ideas on what to include or cover or you will start to challenge our thinking and in doing so, shape ours. You will ultimately be the sharers of those ideas, if you deem them worthy.
For now, I’d just like to outline the rationale behind this tool.
Innovation is important because it drives growth. It may seem like a buzzword, but if you want to grow, you’ll need to innovate. That’s why you need to find a way through all those results on google and amazon.
Innovation is executing new ideas to create value. You need to do all three to innovate successfully – the ideas must be new, you have to actually execute, and they have to create value. Often, when innovation initiatives fail it is because innovation is managed as an event (I got a new idea!) rather than as a process.
When organisations try to become more innovative, their first step is usually to increase their innovation effort. They put “Innovation” into their company values, or buy idea management software, or spend some money on R&D. Their hope is that by doing these things, they’ll get better innovation outcomes – that they will improve at executing new ideas to create value.
In a perfect world, as you increase your innovation efforts, your outcomes will improve proportionally – just like on the card on the bottom right up there.
Unfortunately, that’s not the way it works. If you map firms based on their innovation efforts and outcomes, the outcomes don’t follow a nice, straight line. They scatter all over the place.
The problem for most of these attempts to improve innovation is that effort does not equal outcome – and this is a problem.
If we think about how organisations innovate, you can divide them in three categories based on effort, and three more based on outcomes.
Organisations in the left column aren’t trying to innovate much at all. They are content with their current business model, and they are happy to keep working it as hard as they come. Growth comes mainly through acquisitions, and if they do innovate, it is usually done to improve efficiency – to cut costs.
This might sound bad, but there are loads of successful, profitable companies in this region. Most of the traditional strategy tools that organisations use are designed to get you into this category – where you have a sustainable competitive advantage and you can build a protective moat around it to keep others out.
The organisations in the middle column realise that innovation is important, and they are committed to doing it. Most of the time, these organisations have a core value that they use to differentiate themselves, and all of their innovation is done to support this core value.
On the other hand, innovation itself is the core value, and the main source of differentiation for the organisations in the column on the right.
We can sort organisations in the same way in rows. Those on the bottom aren’t getting any positive innovation outcomes. They might not be generating any ideas at all, or they might be generating plenty of ideas, but those ideas aren’t creating value, and they aren’t spreading.
Organisations in the middle are pretty good at executing new ideas to create value. They do it regularly. However, nearly all of their innovations are incremental – this is how we can tell them apart from organisations in the top row.
The ones on top are the ones that are great at innovating. They come up with both incremental innovations, and bigger ones – new product categories, or new business models. They probably innovate everything – products, services, processes, and business models.
If we put these six categories together, we can identify nine types of innovative organisations:
This has some important outcomes:
- It helps you identify where you are right now, and where you want to go. This journey is a big part of developing a strategy, and it can help you figure out where innovation should sit in your business model.
- You can discover which tools to use. The big problem with many of the 54,000 innovation books is that they try to provide one-size-fits-all solutions. The problem is that in a complex world, using a one-size-fits-all tool can do more harm than good. The Innovation Matrix will help you figure out which ones are right for you in your current situation.
- No one stays in the same box for long. When you start mapping organisations using this tool, you quickly realise that nothing stays the same. Organisations follow trajectories through the various regions. The dynamics of innovation are very important.
Traditional strategy is dead – so what should you do? Innovate.
We’re working on new names for the nine categories (to answer the most common question I get when I say that – yes, Unicorns are still there), tools, operating rules and investment strategies that you can use in each region, and examples of how organisations have changed through time.
We’re going deep on this, and we’ll let you know what we learn.
If you have any questions, or problems that you need help with, please tell us. If we connect up to discuss these, it’s likely to help make this a more useful tool for everyone.