The Innovation Loop

The Innovation Loop

It’s sad but true that most initiatives designed to improve innovation within organisations fail.

This is frustrating, because we actually know a fair bit about what makes innovation work.  Our results should be better.  But still, countless organisations are having brainstorming sessions, adding idea management systems, building idea diffusion networks or implementing some other well-meaning innovation idea, only to fail to deliver better results.


I think that there’s a missing ingredient in many of these efforts, and it can be summed up in this diagram:

The Innovation Loop


It’s The Innovation Loop – and it is this core set of skills and processes that you need to underpin a successful innovation effort.



Innovation starts with ideas – they are the lightning bolt that ignites things.  The ideas can be for products and services, new ways of doing things, new markets to serve, or new business models.  If we have better ideas, we are more innovative.  If we have lots of ideas, we are more innovative.  Taking steps to improve both the quality and the quantity of ideas in our organisations is important.  However, good ideas are necessary, but not sufficient for innovating.

The other parts of The Innovation Loop are also critical.  These are the monkey wrench – the hard work that makes the idea real.

Build Hypotheses

Next, we need to formulate a hypothesis about our idea – what change do we expect to see if we implement it?  Will people buy more of our stuff? Be happier? Tell their friends about us?  We need to link our ideas to expected outcomes.



Now – test the idea!  Pilot it, prototype it, build a minimum viable product, or a wire-frame, or a mock-up.  Figure out how to test your idea – preferably as cheaply and as easily as possible.

Experimenting is the core innovation skill.



Ok, you’ve run your experiment – now, measure the results.  Was your hypothesis correct?  Did you get change in the direction (positive or negative) that you expected?  As much change as you expected?  Did something cool but completely unexpected happen?  Or something bad but completely unexpected?

Figure out if the idea worked or not.



If your idea did work, now you have to scale it.  Do more of it, apply it in a different setting, get people to buy into it.  All of these are parts of scaling.  It’s not straightforward – but since you’re taking an experimental approach, at least you’re not trying to sell a guess.  You’re pitching data-driven results instead, which is a bit easier.

As you start to scale, you will have many new ideas about what will work and what won’t – put them through this process too.



What if your hypothesis was wrong?  Well, then, you have to learn from it.  Every experiment yields data – and this helps us learn.  Why didn’t it work?  Was the idea bad, or was it just the wrong setting for it?  Are we targeting the wrong people?  Do we need better execution? Does it not fit with our skills or values?

Learning is the key to making the experimental approach work.

The Innovation Loop is at the heart of successful approaches to innovation.  It is a core component of the ideas in lean start-up, and in discovery-driven growth.  It is well-documented that using these approaches will increase your chances of success.  Your idea management system will work much better if you have this loop working underneath it, and so will your stage-gate process.

Experimenting effectively builds your innovation capability.

There are other factors that are also important.  Nilofer Merchant and I are working on identifying what these are.  You need to open up your network to more (and new) people – this helps with getting better ideas, and it helps with scaling.  And you need to have purpose – this is what helps you devise hypotheses about what will create value for people.   You have to get these two things right to innovate.  The Innovation Loop is simply the process that drives success.

The key point, though, is that this is simple, but not easy. This is a very simple model.  But executing it is not easy – it often requires significant change in the way that we do things.  Experimenting means that we have to be comfortable with seeing some of our ideas fail.  Or, at least, some won’t work in the way we expected them to.

It also means that we have to push decision-making authority out towards the front-line.  Innovative cultures are experimental – but experimenting well means that everyone has to be involved with the process.  This was the key to the success of the Toyota Production System.  Jeffrey Pfeffer and Bob Sutton point out that:

The Toyota Production System is about philosophy and perspective, about such things as people, processes, quality, and continuous improvement. It is not just a set of techniques or practices: On the surface, TPS appears simple…

What is important is not so much what we do—the specific people management techniques and practices—but why we do it—the underlying philosophy and view of people and the business that provides a foundation for the practices.

The Innovation Loop is a tool that will help you build a philosophy and perspective that supports innovation.  It also appears simple, but if you implement it, the changes may be profound.


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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.

22 thoughts on “The Innovation Loop

  1. Hi, Tim! I love your blog. This time, I think you got 80% of where you needed to go. The missing 20% comes from lack of clarity on the difference between the process of innovation and the culture of innovation.

    You’ve listed six steps of an innovation process. Though we might quibble a bit on the steps (my process is only three steps), we are 100% agreed that a process is required to achieve optimal results.

    A good process will result in scalable ideas that actually get scaled, but only if people follow the process. That’s where culture comes in. That’s where I think you and Nilofer should focus, and not on open innovation, having hypotheses and being willing to fail. Those are elements of innovation process, strategy and/or culture, but they are far from key determinants in the success of the innovation process.

    I’ve identified, based on anecdotal evidence, what I believe to be the three marks of a successful innovative company and the three levers that managers can use to build and sustain a culture of successful innovation. If you and Nilofer want to test my conclusions through your research, you would have my full support and collaboration. Write to me for more information if this is of interest, david (at) theinnovationworkgroup (dot) com.

      • OK, Tim. To summarize, the three marks of a world-class innovator (35,000 foot view) are:

        1) Shared definition of innovation
        2) Demonstrated commitment to innovation (human/financial resources)
        3) Use of best practices

        You’ll recognize nos. 2 and 3 as the two axes on your world-class matrix. I got this instantly when I saw your matrix, which is why I asked and you graciously consented to allow my company to use it in our literature.

        With these three (provided that the degree of commitment is sufficiently great to suit the company’s strategic objectives), a firm is a world-class innovator. Missing any one of them, the firm is not.

        The three levers that create a culture of innovation are:

        1) Policies
        2) Programs
        3) Structure (Innovation must have a place in the table of organization)

        Your blog listed only a few details from these three categories. The level of abstraction of the points on your list is too low to be universal. For instance, you can be a world-class innovator without open innovation (fresh faces). Moreover, having all the points you list is still insufficient to make a firm a world-class innovator. If your research focuses on points like these, you may end up creating a laundry list which is neither comprehensive nor essential, and you might confuse readers who want to advance to world class.

        My approach was to extract the essentials and leave the details for a second round. There are almost infinite varieties of each of the marks and levers cited here. There is no one-size-fits-all innovation program, structure, definition or collection of best practices.

        I believe these 3 and 3 define the essence of world-class innovation. What do you think?

        • Thanks for that David – very interesting.

          What you’re saying definitely rings true, and I would say that your approach makes good sense to me.

          In terms of our research, collaboration isn’t just open innovation. It’s actually a relatively complex and nuanced term, so we’ll put a lot into unpacking it. The second factor, purpose, is similar to what you’re talking about with the level of commitment to strategic objectives.

          So, overall, it seems like we’re pretty well aligned. Thanks very much for sharing your ideas – it definitely sounds like you’re doing good work!

  2. A learning organization will not assign blame when things go awry with experimentation. Yet too often I see those leading innovation as unaware of the very real risk front-line folks feel comes with making a mistake and the real fear they have of being blamed. Saying “it’s OK to fail” is easier when you are in a privileged position in the organizational hierarchy unless such an approach is deeply embedded in an organization’s DNA … and that requires leadership beyond just saying it. Obvious I know, but still underappreciated and under-implemented.

    • I fully agree Jeffrey. That’s a big part of why I’m saying that this is simple, but not easy. Actually making the changes that support this process is a significant undertaking. And trust is absolutely essential to making it work, as you’ve pointed out on twitter.

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