Tag: open innovation

Key Issues in Innovation Management – Revisited – Part 1
At the beginning of 2013, Tim Kastelle and I identified four key issues in innovation management for the time to come. From our point of view, all of the issues pinned down at that time have gained significant importance, are being intensively debated and can still be considered cutting-edge for companies to stay ahead in managing innovation. Let’s have a brief look at each of them:

Differentiating and integrative innovation concepts

Innovation can’t be tackled through broad-brush recipes or tools. It comes in various facets and requires integrative concepts and approaches that account for the integration of those different contexts as well as their reciprocal tensions. An increasingly popular case in point is the “Three Horizons” framework, which aims at integrating an organization’s entire innovation spectrum by means of three distinct time and scope categories – all of which feature particular purposes, conditions and requirements. Another example is the recently introduced strategy framework by Martin Reeves, Knut Haanæs, and Janmejaya Sinha from BCG. Here, dedicated strategies and innovation approaches are defined for different business environments, characterized by the factors predictability, malleability and harshness (see figure below). In most cases, companies have to deploy multiple strategies simultaneously in order to serve different environments they operate in. Let’s remind: One size does not fit all.

Reinvention through business model innovation

Accelerating dynamics and pace of disruption in most industries, in particular triggered by the perfusion of new technologies, lead to decreasing life times of existing business models. This requires companies to proactively or reactively innovate their business models in order to remain competitive. In either case, companies are frequently forced to reinvent themselves by changing the way they have been doing business so far. Recent research has confirmed successfully disrupting as well as outperforming companies to be significantly more engaged in business model innovation. However, it has also turned out that creating new or innovating existing business models by (re-)combining internal and external capabilities requires in particular protected spaces – separated from but connected with the core – and CEO sponsorship.

Open and social co-creation

Enabled by the accelerating pace of digitalization, a new model for value creation is taking shape – spreading in almost any industry. Rather than on delivering mass-scaled products or services, the focus is on creating data-based platforms that enable a number of stakeholders, such as customers, partnering companies and third party contributors, to participate in co-creating highly contextualized solutions. Popular examples are: Apple’s App Store, Google Play, GE, Amazon, Alibaba, Kickstarter, AirBnB, 3M or Ebay. The value proposition of those open platform business models is a more customer-centered, even individualized delivery of services and solutions by leveraging access to an entire ecosystem. The platform environment is mostly characterized by a tension between collaboration and competition of the participating companies, often referred to as coopetition. IDC predicts that by 2018 more than 50 percent of large enterprises – and more than 80 percent of firms with advanced digital transformation strategies – will create and/or partner with platforms. Platform business models tend to affect, oftentimes disrupt, multiple industries over time. For one, attached ecosystems are mostly cross-industry. For another, the underlying business model logics or deployed digital algorithms often allow to be transferred from a core industry to an adjacent one. Uber is a current prime example: they are attempting to expand into healthcare and travel.

Even traditional producers of physical products can benefit from platforms by augmenting their products with communities. These communities stimulate social engagement around the product through participation in forums, sharing, collaboration or even user-driven innovation by co-creating new products. Social interactions strengthen emotional attachment and trust on the customer side, resulting in increased brand premium and prevention from being commoditized in increasingly competitive and transparent environments. Cases in point: Lego and Burberry.

The challenge for companies will be to find their positions in those upcoming platform ecosystems. Not every company has the capability and influence to act as an orchestrating platform builder. But even participating in other firms’ ecosystems can be highly attractive, as demonstrated by e.g. several app developers. As can be seen from the figure below, co-creation platforms feature some special characteristics that have a major impact on shaping new market environments:
- Created solutions are integrated and often cross-industry.
- Interactions are complex and unpredictable. Leadership through vision and influence, rather than command and control, is required.
- Network effects occur, inducing strong monopoly tendencies.
- Winner-takes-all dynamics play out.
These will be major rules, most upcoming 21 C businesses will play by. We are headed towards a co-creative platform economy.

Adapted from: https://nbry.wordpress.com/2014/06/27/massive-platforms-for-cocreation-the-new-normal-22/

Culture of experimentation (and speed)

In the first place, experimentation is about testing assumptions and hypotheses by means of a scientific learning approach. Recently, experimentation in innovation management is particularly facilitated by intensified use of (rapid) prototyping. In particular for industrial products this, in turn, has been stimulated by maturing 3D printing technologies. A culture of experimentation is becoming increasingly important for companies – in manifold directions:
- Disruptive and radical innovation: If a company intends to pursue radical, or even disruptive innovation by introducing a novel technology or business model, this can only be accomplished through initial ideas or visions, followed by continuous, iterative testing for customer adoption. It requires a more deliberated approach, such as the lean startup process, design thinking or a combination thereof. Tip: Tim Kastelle has posted a worthwhile series on how to implement lean startup for innovation initiatives.
- Unpredictable environments: Inherently dynamic and unpredictable industries (such as technology, software, fashion or internet retailing) require experimentation without predefined goals, embedded in the operations, to increase variance. A variety of options enables the company to adapt quickly to changing conditions by selecting the most promising ones and scaling them up. Operating in unpredictable environments relies on an agile organization, following an adaptive, evolutionary and more bottom-up approach, resembling complex adaptive systems, e.g. in biology. A well-suited way to govern this approach is to manage a portfolio of initiatives.
- Incremental innovation: Even in highly mature industries, such as automotive, experimentation gains ever more importance. While stage-gate processes have traditionally been favored in predictable environments, a new generation of product innovation process is taking hold due to increased pressure: lean innovation. It combines an agile front end with a lean back end in order to increase effectiveness (hit rate) and efficiency (cost and resources) as compared to highly linear stage-gate processes.
We can see that experimentation comes in different flavors, depending on the innovation context. However, all of them share the following: experimental approaches are a prerequisite for innovation speed and therefore help address time-efficient development and also organizational adoption of new technologies – two of the most pressing issues companies will be facing in the time ahead. Companies that fail to adapt and implement emerging technologies quickly enough, will be at risk of falling victim to “Digital Darwinism” and becoming obsolete. Conclusion: developing a culture of experimentation is vital for both building new businesses as well as for competing in existing businesses – with distinct characteristics, though.
8 March 2016
Five Roles for Your Innovation Team
The Problem with Solved Problems that Aren’t Solved

Phil was certain that his company had their innovation problems solved. After all, they had a dedicated innovation team, they had idea management software, and they had started a big internal PR effort to highlight successful innovations.

What could possibly go wrong?

Lots, actually. Over the past few years, I’ve met plenty of people in Phil’s position. They think that they have made the investments that are required to make their organisations more innovative. So they end up feeling perplexed when they find, after a few years, that their organisations are no better at innovating then they were before they made those investments.

They thought that innovation was a solved problem, when, in fact it was not. Usually, this is a sign that we haven’t solved the right problem.

One of the big issues here is that there are actually five roles that an innovation team can fulfil. We need to have all five filled if we are going to innovate successfully, but many innovation efforts only cover a couple of them. We need to better understand these roles.

Five Roles for Your Innovation Team

Innovation is the process of idea management. To get the most out of your innovation team, you need to align its responsibilities with the parts of the process that need the most help. The process looks like this:

In order to innovate effectively, you need to be able to execute all five steps (go here to read about the challenges in the circle in red).

With this in mind, here are the five roles that your innovation team can fill:
1. Information Facilitation: when you do information facilitation, you find information about innovation, and distribute this to people that are generating ideas. This will help them figure out how to best execute the new ideas. In this role you can also work on developing processes and infrastructure that support all parts of the innovation process. This type of group is most active in supporting idea generation.
2. Opportunity Consultant: a group doing this will do everything that an Information Facilitation team does, but they will take a more active role in selecting ideas. They work to ensure that the ideas that are pursued connect with the organisation’s overall strategy. In this role you work on developing the best possible set of criteria for evaluating ideas, particularly for fit with objectives.
3. Opportunity Enabler: this type of group goes one step further – they work to connect ideas with those that have the resources to execute them. Enabling collaboration is a big part of this role – you need a group in this role if you are pursuing an open innovation strategy. This type of team will also work on developing implementation plans, and trying to quantify outcomes and learnings from new initiatives. Opportunity enablers are active in supporting all steps in the innovation process – idea generation, selection, testing and diffusion.
4. Idea Execution: this is the most active role you can have – this is a group that doesn’t just support the innovation process, they actually undertake all the steps. Most R&D groups fall into this category. Usually, with this type of group, there is no problem with getting innovative results – the bigger challenge is integrating their ideas back into the core business.
5. Business Model Development: genuinely new innovations usually need new business models to help them realise their full market potential. Unlike the other four roles, this one can be mixed with the other four.
Which Type of Team is Best For You?

Let’s go back to Phil – how does this help with his problem? The issue in his firm is that the top managers set up an innovation team that has the skill-set and resources available to be Information Enablers, but the managers are expecting them to an Idea Execution team.

This, obviously, is a big problem.

And it’s not uncommon. Nearly everyone that sets up these teams thinks that they are building an Idea Execution team. You can’t set up an innovation group, with responsibility for innovating, without also provided the resources that are required to do this. If you have limited resources (or limited commitment), it is better to acknowledge up front that your new team will be Opportunity Consultants or Enablers. Or even Information Facilitators. The more clear you are about the group’s objectives, the more likely it is that they will be successful. And the objectives have to align with the resources.

It’s worth noting that the same problem happens with innovation software. Organisations often buy a piece of idea management software and then assume that they have innovation handled. This is not true – you still need all of these roles filled.

Closely related to this, as you move up the scale, the resources and skills that you need increase. Don’t expect one group to fill more than one or at most two of these roles. To some extent the lower-level activities are included as you move up the ladder, but not entirely. If you need to have all four roles filled within your organisation, you probably need to have more than one group working to support innovation. Or you at least need to have responsibility for these different roles clearly assigned to different people within one large team.

The last tricky bit is figuring out where business model innovation fits. Many organisations think that it should come after all of the other stuff has happened, as in the picture above. Here’s the issue: even if you sink a bunch of resources into building an Idea Execution team, you still might not get better at innovation. That’s because they still only do two parts of innovation – they execute new ideas. But innovation is executing new ideas to create value.

If you’re just executing new ideas without creating value, you often end up frustrated. That’s why business model innovation is so important – it is a great tool for discovering the value that your new idea actually creates.

What you really need is an innovation system that looks like this:

If your innovation team does anything more complex than information sharing, you should probably think about building business model innovation capability into the group as well. It is not something that comes in at the end of idea generation, selection, and execution. It needs to happen in conjunction with all of these steps.

This is the best way to ensure that your organisation will be skilled at all of the parts of the innovation process.

To build an innovative organisation, you need to have all five of these roles filled. If you form an innovation team, they will often fill some, but not all, of these roles. If you buy a piece of innovation software, you face the same issue.

If you don’t understand what the different roles are, and how you’re addressing them, then it’s likely that you will be in the same situation as Phil – investing many resources into innovation, without seeing much return.
15 September 2014
Integrative Innovation
This post was first published as opening post to my new blog, titled Integrative Innovation.

Some people I’ve been collaborating with have recently encouraged me to open up an own blog. After having given it some thought, I decided to do so. I’m launching a new site and platform titled “Integrative Innovation” to share ideas and perspectives on innovation.

You might ask: why “Integrative Innovation”? Is this yet another buzzword?

I don’t think so. I rather think integration plays crucial role when it comes to successful innovation initiatives. I’ll share my view on this as well as the intention and purpose behind this new site.

Sustainable innovation management is a complex capability that requires dynamic integration of various aspects. Quite often though, discussions about innovation focus on a selection of factors, such as technology, R&D, customers or processes, without taking the bigger and systemic picture into account. Scott D. Anthony is absolutely right in saying: point solutions do not address a systematic challenge. Instead of following one-size-fits-all or one-sided concepts, integrative innovation approaches are needed for organizations to succeed. The need for integration is manifold – I see at least four major issues in this context:
- Integration of Directions of Impact
- Integration of Stakeholders
- Integration of Capabilities
- Integration of People
Integration of Directions of Impact

Innovation management requires a balance of different – often opposing – objectives, strategies and approaches. Examples of these tensions are:
- Incremental vs. radical innovation
- Scale vs. craft
- Strategic short term vs. long term focus
- Exploiting existing business models/technologies vs. exploring new ones
- Structured vs. emergent and experimental processes
It’s essential to understand that those opposing poles are inherently different but equally important. Succesful companies and innovation workers in the time to come will be able to operate integratively and balanced, regardless of their individual inclinations.

Integration of Stakeholders

Organizations find it increasingly impossible to tackle innovation on their own. It tends to be accomplished within open partnerships, networks and communities – including customers. In particular, systemic challenges, such as energy, healthcare, mobility depend on successful collaboration among complementary stakeholders. The future will belong to organizations and people that thrive in interconnected ecosystems. Consequently, successful orchestration of diverse stakeholders is going to be a mandatory capability.

Integration of Capabilities

Innovation management is an integrated discipline. It requires working openly across competencies and organizational functions. Thriving operating models don’t care about organizational boundaries and functional silos. They integrate functional capabilities to form value-creating cross-functional capabilities, as Paul Leinwand and Cesare Mainardi point out:

Indeed, mono-functional excellence will almost never guarantee success. The most distinctive, differentiating capabilities are almost always cross-functional. P&G’s vaunted ability to launch breakthrough products isn’t just a matter of R&D; it requires an integration of competencies, including consumer insights, engineering, external partnerships and brand marketing. Similarly, IKEA’s capability in creating and selling stylish but utilitarian furniture combines functional expertise in design, sourcing, manufacturing, packaging, logistics, the design of customer experience in its retail stores, and cost management; all of these reinforce each other.

Integration of People

Innovation management is people management. Depending on the direction of impact, we need to have the right mix of people, skills and mindsets aboard. Particularly, for exploring novel opportunities with a potential to revolutionize the status quo and existing business models, a high diversity of viewpoints and ideas is conducive. This, in turn, implies that innovation workers and leaders act as brokers, integrative thinkers and catalyzers for collaboration. They must be skilled to hire and allocate adequate human resources. Moreover, they have to feel comfortable balancing consent and dissent as well as associating direction and meaning out of people diversity.

In this sense, Integrative Innovation intends to provide a platform for ideas that help tackle the holistic nature of innovation. In face of ever increasing interrelations, we should beware of not seeing the big picture or overemphasizing certain elements. My purpose is to provide value through integrative thinking and concepts as I deeply believe this is imperative for successful innovation management in the time to come.
22 February 2013