Innovation Matrix 4.0 – Now With More @Nilofer

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.

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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.

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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.

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The problem for most of these attempts to improve innovation is that effort does not equal outcome – and this is a problem.

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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:

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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.

 

 

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Student and teacher of innovation - University of Queensland Business School - links to academic papers, twitter, and so on can be found here.

Please note: I reserve the right to delete comments that are offensive or off-topic.

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14 thoughts on “Innovation Matrix 4.0 – Now With More @Nilofer

  1. Super nice, Tim. Kudos! One thing screams out at me as I read this, though – growth. Growth is definitely important, but just as “innovation” is often reduced to a meaningless buzzword, so too is “growth.” If at all possible, I think it would be interesting to see how innovation drives growth in areas beyond shipping more widgets or raising capital.

    The local Mom-n-Pop business with only two employees – Mom & Pop – might want to pursue growth as a means to provide enough full-time work for their children, perhaps a couple members of the local community. But should, say, Apple – now worth more on paper than something like half the members of the UN combined – really be focused on growth like this? I think not. That kind of thinking will only lead to a race to the bottom; commoditization and corner-cutting. (I believe they’re headed that direction.)

    A lot of people think innovation is merely the next big idea they can use to increase sales. Thing is, innovation is fuel for growth in other areas. Like you said, increasing value. Innovate to reduce customer service costs while simultaneously improving employee – and customer – engagement. Innovate to convert supply chains into supply cycles, reducing costs, reducing waste, reducing emissions, and adding value to the community, region, planet.

    I think we’re on the cusp of a fairly radical change in business, Tim. I see the Big Box retail outlets facing increased resistance and pressure on the global market. I see “Medium Box” retail organizations going out of business in nearly every strip mall I pass, as more and more customers take their shopping online. (Why should we pay more to cover their overhead and inefficiencies?)

    I see a future where growth means growing the product/service offering to – again – add real value; where more effort goes into delivering benefits than into suggesting them. Let the big boxes wither on the vine while we get our commodities from efficient, friendly, online sources anywhere in the world, and let the local retail spaces once filled with corporate, franchised bloat, be taken over by high-mix-low-volume specialists with roots in the local community.

    To me, that’s where innovation-driven growth can be a potent competitive advantage.

    Cheers, mate.

    • Brian, as usual, thanks for the comment. Yours are always worthy of a post by themselves. I guess that’s why you have TWIC!

      I fully agree with what you’re saying about the current and future states of business. The future state is something that we’re really trying to grapple with in this collaboration. To me, innovation and growth MUST be tied to creating genuine value – for customers not shareholders.

      I talked a bit more about the links between innovation and growth in this post last week:

      http://timkastelle.org/blog/2012/11/innovation-for-growth/

      I hope you and the family are doing well and that Penny enjoys her first Christmas!

  2. Quick thoughts

    There appears to be a logical inconsistency in the outcomes dimension. i.e. Innovation has little impact > Pretty good at innovating > Great at innovating.

    Perhaps should read as No good at Innovation > Pretty good at innovating > Great at innovating. or Innovation has little impact > Innovation has some impact > Innovation has great impact

    As for the value of the matrix in a commercial context.

    My initial reaction is I struggle to see the competitive advantage over the long established Boston Box of impact vs. difficulty or the investor’s Risk vs. Return or even the VC’s valuation = problems x solution x expertise. (see http://excapite.wordpress.com/2009/10/09/dont-think-strategy-think-like-a-venture-capitalist/)

    I do see value as a mapping framework of the industry body count. A visualisation of the “big data”. More about lessons learned than forecasting and planning.

    Experience has taught me that innovation like all aspect of investment is multi faceted. You can time the market or spend time in the market. You can disrupt or follow up with a late to market Me2. There are winners and loser adopting both strategies. (see http://excapite.wordpress.com/2010/11/16/why-being-a-me2-is-the-best-innovation-strategy/)

    There is no secret recipe which suggests its more about the cooks (i.e. talent, experimentation, passion and perseverance) than the ingredients (i.e. ideas, investment and intelligence).

    But in the end I would suggest it is all about the trigger points rather than the decision points.

    It’s all about the questions you ask of yourself as organisation, your customers, your suppliers and of course your competitors.

    As with all strategy it is all about the listening and the thinking before executing… brilliantly

    See http://excapite.wordpress.com/2011/03/21/design-thinking/

    • Thanks for the feedback Nigel. That’s a good point about the logical consistency of the rows – I’ll fix that.

      The differentiation from other tools is an interesting issue. I see what you’re saying, but then, I’m trying to solve a different problem. It’s a bit hard to tell because this post only covers the opening part of the argument. You can see more here: http://timkastelle.org/blog/2012/04/the-innovation-matrix-reloaded-again/

      Both Nilofer and I have used the tool with firms with good results, so we’re reasonably confident that it does fill a commercial need. I guess time will tell!

      • One last thought. Your Unicorns are probably more accurately understood as Black Swans. Accidents waiting to happen. Because probability suggests there must be winners out there (admitted numerically small) who have stumbled across innovations without actually trying or at least looking somewhere else at the time.

  3. I think having organizations understand where they are on the continuum is important. However, what TS companies fail to realize is that innovation is really about adopting acceptable, opportunistic change. This change could be in product development, solution processes, strategic mindsets, etc. I work in a 60,000 person global company and involved in local and global level leadership. I’m using the Social Era strategic thinking to offer a way that our organization can not only survive the dynamic times but thrive. Our local business unit (under a social era mindset) is experiencing remarkable success that is capturing the attention of the entire company.

    The problem is that all organizations want to innovate (including mine). Many companies craft laborious efforts to foster “innovation” methods internally. However, I find that having the passion for change, having the passion for innovation… is really having the hunger for seeking a better way to serve your customer, your markets in ways you might not have implemented previously; change.

    And there is the problem. That dirty little word that thwarts all organizations; change. The paradox is that so many companies mitigate risk by doing what they’ve always done to protect establish income streams; yet this very process is probably the riskiest given the pace of change happening in every market.