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Artificial Intelligence is a No-Brainer

Why innovation management needs co-intelligence

Artificial Intelligence is a No-Brainer

GUEST POST from John Bessant

Long fuse, big bang. A great descriptor which Andrew Hargadon uses to describe the way some major innovations arrive and have impact. For a long time they exist but we hardly notice them, they are confined to limited application, there are constraints on what the technology can do and so on. But suddenly, almost as if by magic they move center stage and seem to have impact everywhere we look.

Which is pretty much the story we now face with the wonderful world of AI. While there is plenty of debate about labels — artificial intelligence, machine learning, different models and approaches — the result is the same. Everywhere we look there is AI — and it’s already having an impact.

More than that; the pace of innovation within the world of AI is breath-taking, even by today’s rapid product cycle standards. We’ve become used to seeing major shifts in things like mobile phones, change happening on a cycle measured in months. But AI announcements of a breakthrough nature seem to happen with weekly frequency.

That’s also reflected in the extent of use — from the ‘early days’ (only last year!) of hearing about Chat GPT and other models we’ve now reached a situation where estimates suggest that millions of people are experimenting with them. Chat GPT has grown from a handful of people to over 200 million in less than a year; it added its first million subscribers within five days of launch! Similar figures show massive and rapid take -up of competing products like Anthropic’s Claude and Google’s Gemini, etc. It’s pretty clear that there’s a high-paced ‘arms race’ going on and it’s drawing in all the big players.

This rapid rate of adoption is being led by an even faster proliferation on the supply side, with many new players entering the market , especially in niche fields. As with the apps market there’s a huge number of players jumping on the bandwagon, and significant growth in the open source availability of models. And many models now allow for users to create their own custom versions — mini-GPTs’ and ‘Co-pilots’ which they can deploy for highly specific needs.

Not surprisingly estimates suggest that the growth potential in the market for AI technologies is vast, amounting to around 200 billion U.S. dollars in 2023 and expected to grow to over 1.8 trillion U.S. dollars by 2030.

Growth in Artificial Intelligence

There’s another important aspect to this growth. As Ethan Mollick suggests in his excellent book ‘Co-intelligence’, everything that we see AI doing today is the product of a far-from-perfect version of the technology; in very short time, given the rate of growth so far, we can expect much more power, integration and multi-modality.

The all-singing, dancing and doing pretty much anything else version of AI we can imagine isn’t far off. Speculation about when AGI — artificial general intelligence — will arrive is still just that — speculative — but the direction of travel is clear.

Not that the impact is seen as entirely positive. Whilst there have been impressive breakthroughs, using AI to help understand and innovate in fields as diverse as healthcare , distribution and education these are matched by growing concern about, for example, privacy and data security, deep-fake abuse and significant employment effects.

With its demonstrable potential for undertaking a wide range of tasks AI certainly poses a threat to the quality and quantity of a wide range of jobs — and at the limit could eliminate them entirely. And where earlier generations of technological automation impacted simple manual operations or basic tasks AI has the capacity to undertake many complex operations — often doing so faster and more effectively than humans.

AI models like Chat GPT can now routinely pass difficult exams for law or medical school, they can interpret complex data sets and spot patterns better than their human counterparts and they can quickly combine and analyze complex data to arrive at decisions which may often be better quality than those made by even experienced practitioners. Not surprisingly the policy discussion around this potential impact has proliferated at a similarly fast rate, echoing growing public concern about the darker side of AI.

But is it inevitable going to be a case of replacement, with human beings shunted to the side-lines? No-one is sure and it is still early days. We’ve had technological revolutions before — think back fifty years to when we first felt the early shock waves of what was to become the ‘microelectronics revolution’. Newspaper headlines and media programs with provocative titles like ‘Now the chips are down’ prompted frenzied discussion and policy planning for a future world staffed by robots and automated to the point where most activity would be undertaken by automated systems, overseen by one man and a dog. The role of the dog being to act as security guard, the role of the man being confined to feeding the dog.

Automation Man and Dog

This didn’t materialize; as many commentators pointed out at the time and as history has shown there were shifts and job changes but there was also compensating creation of new roles and tasks for which new skills were needed. Change yes — but not always in the negative direction and with growing potential for improving the content and quality of remaining and new jobs.

So if history is any guide then there are some grounds for optimism. Certainly we should be exploring and anticipating and particularly trying to match skills and capacity building to likely future needs.

Not least in the area of innovation management. What impact is AI having — and what might the future hold? It’s certainly implicated in a major shift right across the innovation space in terms of its application. If we take a simple ‘innovation compass’ to map these developments we can find plenty of examples:

Exploring Innovation Space

Innovation in terms of what we offer the world — our products and services — here AI already has a strong presence in everything from toys through intelligent and interactive services on our phones through to advanced weapon systems

And it’s the same story if we look at process innovation — changes in the ways we create and deliver whatever it is we offer. AI is embedded in automated and self-optimizing control systems for a huge range of tasks from mining, through manufacturing and out to service delivery.

Position innovation is another dimension where we innovate in opening up new or under-served markets, and changing the stories we tell to existing ones. AI has been a key enabler here, helping spot emerging trends, providing detailed market analysis and underpinning so many of the platform businesses which effectively handle the connection between multi-sided markets. Think Amazon, Uber, Alibaba or AirBnB and imagine them without the support of AI.

And innovation is possible through rethinking the whole approach to what we do, coming up with new business models. Rethinking the underlying value and how it might be delivered — think Spotify, Netflix and many others replacing the way we consume and enjoy our entertainment. Once again AI step forward as a key enabler.

AI is already a 360 degree solution looking for problems to attach to. Importantly this isn’t just in the commercial world; the power of AI is also being harnessed to enable social innovation in many different ways.

But perhaps the real question is not about AI-enabled innovations but one of how it affects innovators — and the organizations employing them? By now we know that innovation isn’t some magical force that strikes blindly in the light bulb moment. It’s a process which can be organized and managed so that we are able to repeat the trick. And after over 100 years of research and documenting hard-won experience we know the kind of things we need to put in place — how to manage innovation. It’s reached the point where we can codify it into an international standard — ISO 56001- and use this as a template to check out the ways in which we build and operate our innovation management systems.

So how will AI affect this — and, more to the point, how is it already doing so? Let’s take our helicopter and look down on where and how AI playing a role in the key areas of innovation management systems.

Typically the ‘front end’ of innovation involves various kinds of search activity, picking up strong and weak signals about needs and opportunities for change. And this kind of exploration and forecasting is something which AI has already shown itself to be very good at — whether in the search for new protein forms or the generation of ideas for consumer products.

Frank Piller’s research team published an excellent piece last year describing their exploration of this aspect of innovation. They looked at the potential which AI offered and tested their predictions out by tasking Chat GPT with a number of prompts based on the needs of a fictitious outdoor activities company. They had it monitoring and picking up on trends, scraping online communities for early warning signals about new consumer themes and, crucially, actually doing idea generation to come up with new product concepts. Their results mimic many other studies which suggest that AI is very good at this — in fact, as Mollick reports, it often does the job better than humans.

Of course finding opportunities is only the start of the innovation process; a key next stage is some kind of strategic selection. Out of all the possibilities of what we could do, what are we going to do and why? Limited resources mean we have to make choices — and the evidence is that AI is pretty helpful here too. It can explore and compare alternatives, make better bets and build more viable business models to take emerging value propositions forward. (At least in the test case where it competed against MBA students…!)

Innovation Process John Bessant

And then we are in the world of implementation, the long and winding road to converting our value proposition into something which will actually work and be wanted. Today’s agile innovation involves a cycle of testing, trial and error learning, gradually pivoting and homing in on what works and building from that. And once again AI is good at this — not least because it’s at the heart of how it does what it does. There’s a clue in the label — machine learning is all about deploying different learning and improvement strategies. AI can carry out fast experiments and focus in, it can simulate markets and bring to bear many of the adoption influences as probabilistic variables which it can work with.

Of course launching a successful version of a value proposition converted to a viable solution is still only half the innovation journey. To have impact we need to scale — but here again AI is likely to change the game. Much of the scaling journey involves understanding and configuring your solution to match the high variability across populations and accelerate diffusion. We know a lot about what influences this (not least thanks to the extensive work of Everett Rogers) and AI has particular capabilities in making sense of the preferences and predilections of populations through studying big datasets. It’s record in persuasion in fields like election campaigning suggests it has the capacity to enhance our ability to influence the innovation adoption decision process.

Scaling also involves complementary assets — the ‘who else?’ and ‘what else?’ which we need to have impact at scale. We need to assemble value networks, ecosystems of co-operating stakeholders — but to do this we need to be able to make connections. Specifically finding potential partners, forming relationships and getting the whole system to perform with emergent properties, where the whole is greater than the sum of the parts.

And here too AI has an growing track record in enabling recombinant innovation, cross-linking, connecting and making sense of patterns, even if we humans can’t always see them.

So far, so disturbing — at least if you are a practicing innovation manager looking over your shoulder at the AI competition rapidly catching up. But what about the bigger picture, the idea of developing and executing an innovation strategy? Here our concern is with the long-term, managing the process of accumulating competencies and capabilities to create long term competitiveness in volatile and unpredictable markets?

It involves being able to imagine and explore different options and make decisions based on the best use of resources and the likely fit with a future world. Which is, once again, the kind of thing which AI has shown itself to be good at. It’s moved a long way from playing chess and winning by brute calculating force. Now it can beat world champions at complex games of strategy like Go and win poker tournaments, bluffing with the best of them to sweep the pot.

Artificial Intelligence Poker Player

So what are we left with? In many ways it takes us right back to basics. We’ve survived as a species on the back of our imaginations — we’re not big or fast, or able to fly, but we are able to think. And our creativity has helped us devise and share tools and techniques, to innovate our way out of trouble. Importantly we’ve learned to do this collectively — shared creativity is a key part of the puzzle.

We’ve seen this throughout history; the recent response to the Covid-19 pandemic provides yet another illustration. In the face of crisis we can work together and innovate radically. It’s something we see in the humanitarian innovation world and in many other crisis contexts. Innovation benefits from more minds on the job.

So one way forward is not to wring our hands and say that the game is over and we should step back and let the AI take over. Rather it points towards us finding ways of working with it — as Mollick’s book title suggests, learning to treat it as a ‘co-intelligence’. Different, certainly but often in in complementary ways. Diversity has always mattered in innovation teams — so maybe by recruiting AI to our team we amplify that effect. There’s enough to do in meeting the challenge of managing innovation against a background of uncertainty; it makes sense to take advantage of all the help we can get.

AI may seem to point to a direction in which our role becomes superfluous — the ‘no-brain needed’ option. But we’re also seeing real possibilities for it to become an effective partner in the process.

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Image credits: Dall-E via Microsoft CoPilot, John Bessant

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Agile Innovation

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How to Embrace Agile Leadership to Innovate at Speed

Agile Innovation

GUEST POST from Diana Porumboiu

In a world dominated by uncertainty, how can we prepare for the unpredictable and keep innovating in what seems like a highly chaotic environment?

We simply need to be faster in adapting to change and navigating uncertainty. Studies show that organizations that move faster achieve significantly better results across various metrics, including profitability, operational resilience, organizational health, and growth.

How to make sure your organization is fast enough? Innovation at speed is more relevant than ever, but someone must put the pedal to the metal. Typically, that someone has to be a leader, because in the face of unprecedented change, leaders are needed to get us through the transformation.

However, unless organizations rethink leadership, they won’t be able to innovate systematically. In this day and age, great leadership requires a different mindset and a new approach to drive innovation and keep pace with change. We call this agile leadership.

This article, the second in the series dedicated to Agile Innovation Management, explores the critical role of agile leadership in innovating at speed.

Discover the key challenges and misconceptions surrounding the topic and understand why many leaders struggle with it. We’ll also provide practical steps and examples that will hopefully inspire you to increase the agility of your organization.

From Old Leadership Models to Agile Leadership

Let’s begin by clarifying what we mean by agile leadership and its position in relation to established leadership models.

The history of leadership traces back to Frederick Winslow Taylor, American engineer renown for his methods aimed at enhancing efficiency and productivity. Innovative at his time for shaping industrial management, his legacy still lives on today.

Unfortunately, his methods are not adapted for this century. Despite this, many leaders and managers still adhere to “Taylorism”, a top-down approach where leaders make the decisions and plans, and employees are tasked with executing them.

This model conflicts with the flexible and adaptable mindset required for agility. The gap between employees and Taylorist leaders trying to implement agile practices often leads to frustration and inefficiency.

Even if they introduce squads and sprints, Taylorists maintain a top-down approach, telling people what to do and how.

For successful agile transformations, you need to move away from rigid, outdated models. As we saw in the ING examplepresented in the “Guide to Business Agility” article, simply copying other companies without suitable leadership will not produce the desired outcomes. Therefore, fundamental change is needed.

True agile leadership allows for rapid decision making, resilience, adaptability and innovation. It requires leaders to embrace new ideas, offer clear direction without micromanaging, and create a culture that supports speed and innovation.

Agile leadership is about rapid decision making, resilience, adaptability and innovation.

It’s also important to remember that managers and leaders are not the same. Leadership goes beyond overseeing a group and delivering desired outcomes.

As Seth Godin stated in his “Leadership vs Management” speech, “managers do things right, leaders do the right things”.

While it would be ideal for all managers to cultivate leadership skills, the reality is that their primary focus is on increasing efficiency and productivity within their domains, often overlooking the broader picture. Such skills are essential in leading people, lifting them up and empowering them to become agile, innovative problem solvers.

Despite the progress of AI and technology automating mundane tasks, we still need leaders capable of making decisions that address both present and future challenges. Effective agile leaders should be able to navigate failure and complexities, and map a way to move forward.

To succeed, we need to hone in on critical thinking and those often overlooked “soft skills” like navigating tough conversations, giving and receiving feedback, and showing empathy. No matter where you fall on the org chart, mastering these skills can be the game-changer between just getting by and achieving excellence.

While agile leadership might not be about the “Agile” way, being familiar with the agile values and principles can be useful on a practical level.

For example, the authors of Doing Agile Right help leadership teams shift to agile methods by tailoring the Agile Manifesto’s core values to fit their unique situations. It’s about adapting and making it work for you.

Viima design created from Doing Agile Right: Transformation Without Chaos

To give another example, think of the principle of self-organizing teams. It’s important to know how to build self-organizing teams that thrive, collaborate and continuously learn from each other through continuous feedback and transparent communication.

We’ve seen this time and again in how teams use Viima to collaborate on their ideas, assess, prioritize and develop those that have been discussed openly. We noticed that most successful projects created using Viima have strong leadership too.

But moving away from the practical details to the bigger picture, how much can leaders influence the speed of innovation at an organizational level?

Can Agile Leadership Drive Innovation?

We established in The Guide to Agile Innovation Management that agility enables innovation by embracing experimentation and learning, implementing adaptive planning processes, emphasizing cross-functional collaboration and bringing together diverse perspectives and expertise.

All these elements would not be possible without the guidance of a great leader. So how can a good agile leader unlock innovation in an organization?

Adapting fast by building trust

Agility in leadership is about adapting to changing environments quickly, often under the pressure of performance.

However, this can have negative consequences. The Work Trend Index from Microsoft surveyed over 20,000 people across 11 countries and found that half of them reported experiencing burnout. Although 83% of employees claimed to be productive, only 12% of leaders felt confident their teams were genuinely productive.

To build trust and participation in feedback systems, leaders should regularly share what they’re hearing, how they’re responding, and why. — Work Trend Index 2022

As a leader, offering support and trust can help balance the pressure of performance. Including people in the organization’s narrative and showing them where they fit in helps build trust and provides a sense of purpose.

This sense of purpose encourages people to commit, learn, grow, improve, and innovate. Which brings us to the next point: agile leadership nurtures not only the ability but also the willingness of people to innovate.

Speed requires commitment

Many large firms still rely on outdated “industrial-era management” models. These models focus on hierarchical organizational charts, emphasizing static reporting relationships.

In such environments, it can be extremely difficult for ideas and initiatives to navigate through the many layers of hierarchy and reach the right decision-makers. If they do make it through, the process takes so long that the opportunity may be lost by the time an idea reaches approval.

This approach can lead to a culture with limited transparency and collaboration across teams and departments, along with an attitude of “every man for himself.”

It’s no surprise that over 70% of workforce is disengaged or quietly quitting, which significantly stifles an organization’s ability to innovate. When employees lack motivation, everything slows down. But when there is a sense of ownership and pride, there is higher commitment.

An agile leader fosters a sense of community and nurtures people’s commitment and dedication. This leads to speed and adaptability.

While the right mindset is crucial, using the right tools can also help build trust and promote collaboration. Many leaders use Viima to create processes that enhance idea sharing at all levels, collaboration and trust. They can provide feedback and follow up on people’s ideas in a timely manner, while employees can see the progress of their ideas.

But to reach this level, it’s important to understand the behavioral changes needed. In the next section, we’ll dive into practical tips on how to adapt your mindset by examining leaders who have successfully guided their organizations to thrive and innovate.

How to Be an Agile Leader

How can you become a great leader who adapts to change and guides others into the future? To provide some practical examples, I turned to Collective Genius: The Art and Practice of Leading Innovation by Linda Hill, Greg Brandeau, Emily Truelove, and Kent Lineback.

The authors conducted a decade-long research study of 24 leaders across different organizations and industries. They offer valuable insights into how exceptional leaders cultivate environments that foster collective creativity, collaboration, and experimentation.

In a nutshell, the authors describe the ABC of leadership which drives innovation and makes the shift from “vertical ideology of control” to “horizontal ideology of enablement”.

Their research has identified that to lead an organization that innovates at scale with speed, you need leaders that fill in three different functions:

the Architect — to build the culture and capabilities necessary to collaborate, experiment and work.
the Bridger — to create the bridge between the outside and the inside of the organization by bringing together skills and tools to innovate at speed.
the Catalyst — to accelerate co-creation through the entire ecosystem.

The Architect: Create the right environment

The paradox of business agility is that it takes time to build the capabilities needed for fast response and adaptability. Even if you want to move quickly and encourage others to do the same, you can’t force change.

Achieving agility requires a different mindset — letting go of some control that conventional leadership often demands. This is perhaps the most challenging aspect for many leaders who believe their power lies in maintaining control.

However, as an agile leader, you must recognize existing interdependencies. You rely on employees’ willingness, commitment, and ability to drive progress. Your success depends heavily on others, which is why it’s crucial to create an environment where people can ideate, create, and execute. As we will see in the next chapter, agile leadership involves balancing relinquishing control with providing enough direction and guidance to prevent chaos.

Many elements are at play here, but one of the most innovative animation studios, Pixar, offers a clear example. They created the first feature-length computer-animated film, Toy Story. What’s remarkable about Pixar is that every film they released after Toy Story became an instant commercial success.

Ed Catmull, co-founder of Pixar, is a mastermind of innovation and a pioneer in technology and storytelling. His legacy offers numerous inspiring lessons for leaders, but here are some key points on how he and other company leaders fostered an environment where innovation thrives.

Pixar’s culture is built on two essential elements: diversity and conflict.

Diversity

In this context, diversity means intellectual diversity — bringing together people with different perspectives, skills, working styles, and problem-solving approaches.

At Pixar, three different worlds converged: creative, technical, and business. People from all areas were treated as peers, and all perspectives were valued equally. Among visual artists and tech people, you could also find cultural anthropologists, music producers, and even a professional cheerleader.

When different views come together, great ideas, solutions, and innovations can emerge. But inevitably, disagreements and conflict can also arise.

Conflict

Conflict is something many leaders fear and seek to minimize. When conflict becomes destructive, personal, or a battle for who is right and who is wrong, nobody wins. However, at Pixar, feedback is honest and direct. Sometimes even brutal. But the aim is to improve things and find the best solution.

A confrontation becomes a debate in search of a better solution that serves everyone’s goals. Those who receive and provide feedback should always keep this in mind.

Naturally, this is not always achievable, and tempers can flare quickly under pressure, frustration or when passionate people clash. When conflict turns into a fight to win an argument, you should intervene, remind people of the greater purpose, and bring them back on track.

As a leader, community building should also be on your radar. Foster a strong sense of “we” and psychological safety. This encourages people to stand up for their ideas and pursue the solutions they believe are best for the greater good.

This is what contributed to Pixar’s continued innovation. As a leader, Ed Catmull realized early on the critical role of leadership in creating the context for innovation.

I realized the most exciting thing I had ever done was to help create the unique environment that allowed that film (Toy Story) to be made. My new goal became … to build a studio that had the depth, robustness, and will to keep searching for the hard truths that preserve the confluence of forces necessary to create magic.

The Bridger: Decentralize decision making

Decentralized decision-making is key to breaking down silos and eliminating bottlenecks, enabling faster experimentation, learning, and improvement. Although this approach is increasingly popular and recommended for driving innovation, many struggle with its implementation.

Decentralization demands strong leadership that empowers teams to drive progress, avoids micromanagement, and provides the right support while removing barriers and building innovation capabilities.

For teams to collaborate effectively, they need a leader who plays a central role — not to manage decisions, but to facilitate innovation.

Take the example of Volkswagen. In 2010, Luca De Meo was the CMO for VW, a group of nine brands, helping the organization achieve its goal of becoming a leading car manufacturer.

VW’s marketing decisions were decentralized, with local marketing teams independently creating and implementing their own strategies based on general guidelines from headquarters.

However, this approach led to a lack of communication and collaboration among marketing teams worldwide. Marketing spoke with different voices in each market, lacked alignment, and had no clear strategic role within the organization.

To build mutual trust and respect De Meo organized a two-day design lab where he brought together over seventy people to collaborate, ideate and work together to build a global brand. Of course, a one-time brainstorming workshop is not enough, so this became a recurrent event. Each gathering had different goals or action points on which diverse teams had to work together, bring their own experience and expertise to the table.

He also took a new approach in handling launches by creating a cross-functional team that brought together fresh perspective from young employees in marketing or other fields. He created a small team and gave them a free hand to come up with an integrated marketing strategy for the launch of a new city car model.

De Meo did not interfere and did not tell them how to go about it. Instead, he encouraged them to work as intrapreneurs within the larger organization. He set high expectations and tried to nudge them in the right direction when needed. Most importantly, he encouraged them to take risks and allowed them to make mistakes. The agile way.

A very important thing to highlight from this story is that De Meo made sure that minority voices were heard. In setups with a conventional approach to leadership, the loudest (or more experienced) voices usually get their ideas across. This means that many opportunities can be missed.

Long story short, leadership created the environment for people to innovate and removed barriers and enabled people to move faster. The efforts paid off and VW grew both as a recognized brand and in financial results.

The Catalyst: Grow capabilities of everyone around you

Visionary leaders made history, but if we take a closer look, it was not all about vision. It’s not enough to have a vision and expect others to follow you. You also need to set direction on how to get there, not just by dictating but by unleashing and amplifying people’s own capabilities, talents, passion and strengths that are useful for the bigger goal.

In our latest conversation in The Innovation Room podcast, we had the great pleasure of talking to John Bessant, an innovation veteran. From his vast experience he shared a few examples of how innovation leaders focused on facilitating conversations and debates to lead people to the future.

Such leaders can cultivate agility, and what is called dynamic capability: the ability to integrate, build and reconfigure internal and external competences to address rapidly changing environments.

To illustrate dynamic capability, Bessant gives the example of Procter and Gamble. P&G made a major change after 150 years of excelling in R&D and market research. They switched to a model they called “Connect and Develop” — their open innovation approach — well ahead of the open innovation trend. This shift involved a significant change in mindset and took them 20 years to get through it. They stepped back, reassessed, and adapted to the changing world.

This is a summary of their achievements, but reaching such results required an internal shift in culture. P&G needed to get everyone on board with open innovation, not just to embrace external ideas, but internal ones too. Early on, they recognized this model as essential for adapting to future challenges.

P&G leadership understood the critical role of employees in driving these changes. The new approach required employees to be more agile and flexible, to develop skills like curiosity, collaboration, and connectedness.

They worked to support employees who were inclined to control more, were insecure, or were resistant to sharing and opening up. P&G set new challenges and increased the complexity of some tasks to push employees’ capabilities. They ensured that employees worked across the business in different markets. As employees gained experience in different areas and improved at identifying and solving problems, their mindsets began to evolve.

Cultivating an innovative mindset is a process that takes time and a structured, intentional approach.

These are just a few examples, and although summarizing them may make it sound simple, each of these leaders struggled in their journey to achieve the desired outcomes.

Excellent agile leadership is challenging, but it doesn’t have to be an all-or-nothing approach. Let’s explore these challenges in more detail to help you assess what you can realistically implement in your own leadership role.

Challenges and Limitations of Agile Leadership

Being a great leader is never easy and being an agile one — navigating through uncertainty — is even tougher. Whether you call it agile leadership or not, your role as a leader is to create spaces for your teams to adapt quickly and steer the organization toward future success.

Let’s see what are some of these challenges and how you can address them by leading with agility.

1. Providing a sense of certainty in an uncertain environment

Certainty is an emotional state that can influence how we perceive our work environment. While you can’t control uncertainty, you can manage the fear of the unknown by being transparent. The least transparent environments often breed anxiety, rumors and speculations.

Remember: Share the big picture with your team, and don’t shy away from the truth. Provide updates on ongoing projects, successes, and setbacks. This way you build trust and foster a sense of purpose. Balance transparency with discretion — too much detail can overwhelm people, but too little breeds suspicion.

2. Managing the chaos

You want your team to take initiative and explore new ideas, but a lack of guidance can cause confusion and inefficiency. I’ve seen leaders struggle with this balance, either micromanaging their teams or stepping back too far.

Remember: Define clear ground rules and processes to guide your team. Support people to innovate within a framework that provides structure. Encourage ideas to surface and provide top-down guidance to turn them into actionable innovations.

3. Adapting to a new leadership model

Embracing agile leadership requires stepping out of your comfort zone and taking others with you. It demands discipline and a low tolerance for incompetence, with a focus on striving for excellence.

Remember: Encourage a disciplined approach to experimentation and ensure that failures lead to valuable lessons rather than wasted efforts. Candid feedback should flow both ways. Both leaders and employees should be open to having their ideas challenged. Embracing this kind of culture fosters growth and adaptability, but it also demands discipline and high standards to strive for excellence, as mediocrity thrives in comfort zones.

Conclusion

Whether you’re a leader or aspiring to be one, it’s important to recognize that perfection in leadership doesn’t exist — everyone has their own shortcomings and challenges. While we should empathize with these struggles, we must also hold leaders accountable.

Today, speed is a crucial competitive advantage, often going hand in hand with scale. Agility at the team level alone may not be enough; you need speed and scale in innovation to drive meaningful change.

Achieving this requires responsible and committed leadership that understands the need for both rapid and large-scale innovation. As you navigate your leadership journey, strive to lead with accountability, adaptability, and a focus on accelerating innovation.

Article originally published on viima.com/blog

Image credits: Unsplash

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Agile Innovation Management (Part Two)

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How Agility Enables Innovation

Agile Innovation Management (Part Two)

GUEST POST from Diana Porumboiu

In the previous article on agile innovation we covered the main concepts around agile, business agility and its role as a driver for innovation. Now, let’s see how to actually leverage agility to innovate and how other companies have succeeded in this area.

Agility is an enabler for innovation. The pace of innovation, while not easy to achieve, has become the ultimate competitive advantage as we all need to adapt quickly to evolving environments, the digital age and increasing pressing needs.

The reality is that agile thinking is changing the world whether we decide to adopt it or not.

Those who succeed at this are ahead of the game. McKinsey research suggests that agility is a critical factor for organizational success.

The Organizational Health Index (OHI) assesses various aspects of organizational health, including agility, and examines how these factors correlate with business success. An increased organizational health is linked with more resilient, adaptive, and high-performing organizations that can better navigate complexity, drive innovation, and achieve strategic goals.

What’s more, agile organizations are best at balancing both speed and stability, and these are also the companies that rank highest in the organizational health index.

McKinsey Ability — Source: McKinsey&Company

The research goes even deeper and identifies a series of management practices that differentiate the most from the least agile companies.

As you can see, there’s more to business agility than meets the eye and a few sprints just won’t cut it.

However, if we look at the agile principles, there are several ways in which they can enable innovation:

They bring an empirical process control approach, which emphasizes transparency, evaluation, and adaptation.
They enable experimentation and learning as teams are encouraged to test hypotheses, validate assumptions, and learn from both successes and failures. This experimental mindset is essential for innovation.
They are about adaptive planning processes that allow teams to adjust their priorities, strategies, and product roadmaps based on emerging opportunities and threats.
They emphasize customer-centricity. By focusing on delivering value to customers through continuous delivery and customer feedback loops, you make sure your innovations meet real market demands and solve genuine problems.
They encourage cross-functional collaboration and self-organizing teams, bringing together diverse perspectives and expertise.

To get a better idea of how this looks in practice, we’ll take the example of ING Bank.

ING Bank

ING is a global financial institution originally from the Netherlands and a good example to illustrate how agile can be introduced organization-wide, the right way.

ING wanted to become agile for the right reasons. The shift to agility wasn’t about working faster or growing more—it was about being flexible and adaptable. Even though things were going well financially in 2015, ING noticed that customer behavior was changing due to trends in other industries, not just in banking. So, they knew they had to change too.

ING Bank embraced several key principles of agility, drawing inspiration from the practices of tech companies to align with their objectives and operations:

Cross-Functional Teams: ING structured its IT and commercial departments into agile squads, mirroring the approach seen at Tesla. This integration fosters cross-functionality and collaboration, with teams physically situated together within the same premises.

Agile at ING Bank - McKinsey — source: McKinsey & Company

Rapid Decision-Making and Experimentation: Without bottlenecks created by middle management, ING facilitates swift decision-making and continuous experimentation. This agile approach enables the organization to constantly refine and test customer offerings without bureaucratic delays.
Enhanced Collaboration and Transparency: Recognizing the importance of collaboration, ING implemented structural changes to break down silos. Clear delineation of roles, responsibilities, and governance structures fosters improved cooperation across teams and departments.
Accelerated Delivery: Instead of their usual annual product launches, ING adopted a more agile release cycle, rolling out software updates every two weeks. This agile delivery model allows the organization to respond promptly to market demands and customer feedback, ensuring rapid innovation and adaptation.

The first step in achieving this agile transformation was to develop a clear strategy and vision. They started small and rolled out the new structures and way of working across the entire headquarters in eight to nine months.

Last, but not least, they invested significant energy and leadership time in fostering a culture of ownership, empowerment, and customer-centricity, which are foundational elements of an agile culture.

As Bart Schlatmann from ING points out, agility is a means to an end, not the end goal itself; it is the pathway to achieving innovation.

Drawing from these examples and research from other organizations, we can summarize the five tenets of agile organizations:

Purpose-Driven Mindset: Shift from a focus on capturing value to co-creating value with stakeholders, embodying a shared vision across the organization.
Empowered Network of Teams: Transition from top-down direction to self-organizing teams with clear responsibility and authority, fostering engagement, innovative thinking, and collaboration.
Rapid Learning Cycles: Embrace uncertainty and continuous improvement through iterative decision-making and experimentation, prioritizing quick adaptation over rigid planning.
Innovation Culture: Cultivate ownership, empowerment, and customer-centricity, enabling employees to drive organizational success.
Integrated Technology Enablement: View technology as integral to unlocking value and enabling responsiveness to business and stakeholder needs, leveraging advanced tools for seamless integration and rapid innovation.

Actionable Steps to Drive Innovation through Business Agility

We can’t wrap things up without going through some of the key steps that should not be missed in an agile transformation journey.

Constancy of purpose

You might have heard of Edwards Deming and even used his PDCA cycle in your continuous improvement work. He is well known for his legacy in the field of quality management, particularly for his contributions to the improvement of production processes in Japan after World War II. To some degree, his work is also seen as one of the main inspirations for the agile movement.

Among his work, we can also find the “14 Points for Management,” where Deming outlines how essential it is to have a clear and unwavering commitment to a long-term vision or mission.

He called it constancy of purpose. You can also call it your North Star. Regardless of the words you choose, it’s important to set your goals and align all activities, processes, and resources towards achieving them. How to do this?

Communicate the Purpose: Regularly communicate the organization’s purpose, mission and goals as well as how agility contributes to achieving them.
Define Goals: Clearly define objectives and goals that align with the organization’s purpose. These goals should support the overall mission and vision.
Empower Teams: Trust by default and enable teams to make decisions, take ownership of their ideas and work. Provide them with the autonomy and resources they need to innovate and deliver value.
Measure Progress: Measure progress towards your goals, but also establish metrics that can measure your ability to be responsive. Regularly review and assess how agile practices are contributing to the overall mission.
Adapt and Iterate: Embrace continuous improvement processes that align with your internal structures and needs. Encourage teams to experiment, learn, and iterate on their approaches.

Agile leadership

Adopt the ABC of leadership which drives innovation and makes the shift from “vertical ideology of control” to “horizontal ideology of enablement”.

Linda Hill, renowned professor at Harvard Business School, specializing in leadership and innovation makes a great point about the roles a leader should take if they want to drive innovation and agility.

Over time leadership evolved from a purely strategic role, to providing a vision that guides people in the same direction. More recently, research showed that a visionary leader is not enough. You need leaders that can also shape the culture and capabilities needed for people to co-create the future. This requires a different approach to leadership.

Research has identified that in order to lead an organization that innovates at scale with speed, you need leaders that fill in three different functions:

the Architect – to build the culture and capabilities necessary to collaborate, experiment and work.
the Bridger – to create the bridge between the outside and the inside of the organization by bringing together skills and tools to innovate at speed.
the Catalyst – to accelerate co-creation through the entire ecosystem.

Here is Hill’s short summary on the ABC of leadership:

Another top voice is Steve Denning who has been an advocate of agile and agile management for years. He makes some great points about the agile mindset which requires a new way of running organizations.

For an organization to be truly agile, the so called industrial-era management needs to be replaced with digital-age management which is strongly driven by an agile mindset.

The traditional management style makes it hard for agile to work because the old command-and-control approach goes against the agile principles. The top-down approach is riddled with bureaucracy which obstructs visibility to the customer and the realities at the lower levels of the organization.

Some of the most successful and innovative organizations, like Apple, Google, and Microsoft understood this early on and shifted their focus to delivering customer value first, one of the agile principles. This required a change in mindset but also in the corporate culture, which is no easy undertaking.

To make this transition, Denning talks about five major shifts that companies need to make:

From profit-focused to customer-focused goals.
From direct reporting to self-organizing teams where management’s role is not to check on employees, but to enable them to do their work by removing obstacles.
From bureaucracy, rules, and reports to work coordinated by Agile methods and customer feedback.
Prioritize transparency and continuous improvement over predictability.
Encourage horizontal communication rather than top-down directives.

While they are straightforward and make sense for most of us, these changes are maybe the hardest to make, especially for established organizations that are not used to challenging the status quo.

These big undertakings are what make agile possible at scale. But even if you’re not there yet, you can still apply the agile principles at a smaller scale to enable innovation.

Minimize complexity

Complexity is the enemy of agility. People in companies both large and small try to come up with the perfect solution, that often doesn’t exist in the first place, and only end up having solved the wrong problem.

On the other hand, if you were to simply move ahead quickly with something that creates real value and solves at least some of the problems, you’ll see which of your assumptions and concerns are real, and which aren’t. You’ll also see which problems you can work around, and which ones you simply must address directly.

This obviously eliminates a lot of uncertainty and reduces the complexity associated with solving the problem, which again helps you focus your innovation efforts on what matters – creating real value.

The bigger and more complex the problem, the more important it is to take an agile and modular approach.

Thus, the bigger and more complex the problem, the more important it is to take this agile and modular approach that focuses on the speed of making tangible progress.

Conclusion

As we explained in our complete guide to innovation management, there is no single perfect way of managing innovation. Different companies have different approaches for innovation management.

However, the common thread of successful organizations are structures and processes that mitigate the somehow chaotic nature of innovation management.

In these two articles we explored agile as a method to enable innovation and improve its management for sustained success. We don’t believe in quick fixes or miracle solutions. That’s why we made the case of agile as a mindset that should permeate every aspect of the organization.

Article originally published in full format on viima.com/blog

Image credit: Unsplash, McKinsey

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Agile Innovation Management

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Agile Beyond Software Development

Agile Innovation Management

GUEST POST from Diana Porumboiu

Research reveals that 90% of executives recognize the critical importance of agility for their company’s future success, with 96% emphasizing the need to increase agility in the future. What’s more, agile companies grow revenue 37% faster and generate 30% higher profits than their non-agile counterparts.

Incumbents are shaken by the highly dynamic environment they operate in, and they are too slow to respond to disruptive changes. 52% of companies in the Fortune 500 have either gone bankrupt, were acquired, or ceased to exist.

An AEIU survey, 27% of respondents cited their organization’s lack of agility as a competitive disadvantage in anticipating marketplace shifts. Unfortunately, it’s not enough to be better and stronger, you also need to be faster to swiftly adapt to the market race.

Based on our experience in working with top innovators, and on market insights and trends, we can see that the future of innovation management is agile. What does this mean, and how does it concern you, the ambitious innovator?

The following two articles dedicated to agile innovation aim to answer these big questions and act as a guide to agile innovation management. Let’s start by framing the major concepts and explain the thinking behind them and later continue with practical and actionable tips.

Let’s start by untangling the intricate connection between business agility and innovation management by shedding some light on all these terms: innovation, innovation management, agile and business agility.

Innovation is a highly debated topic. You might be sick of hearing this buzzword everywhere, but whether you choose to use it or not, the concept behind it is here to stay.

The short definition of innovation comes from the Merriam-Webster dictionary: innovation is “the introduction of something new.”

This is an oversimplification, so we have to take it one step further to explain the nuances.

Innovation is not just about generating and implementing new ideas. While these ideas can refer to products, services or processes, adding innovation to the mix means that you bring about positive change and create value.

Through innovation you should identify new opportunities that can be transformed into tangible outcomes that address unmet needs, solve problems, or improve existing conditions.

To achieve these results, you need to manage a series of activities that are involved in the process of introducing those new ideas. These activities can range from ideation, development prioritization, evaluation, to implementation and launching of new products or introducing new processes. This is what we call “innovation management”.

The challenge is not only in managing all these activities to pursue innovation, but also in doing it fast.

Here, we refer to the pace of innovation, which plays a crucial role in sustained business growth.

In a nutshell, the pace of innovation is the speed at which an organization can improve their existing products and services and their ability to develop them while capturing the needs of the constantly evolving markets.

Your rate of improvement (so the pace of innovation), has compounding, exponential returns and thus gives a clear competitive advantage.

Why are we talking about the pace of innovation? Because it goes hand in hand with the agile mindset, which in the past decade has developed into the more holistic approach, business agility.

A short introduction to “agile”

Agile as a business concept emerged in 2001 with the “Agile Manifesto”.

At its core, agile refers to a set of twelve principles and four values intended for teams that work on software development. It started as a manifesto, but the brains behind it never imagined that their vision on how to better develop software would play such a pivotal role in management at an organizational level.

This is, in a nutshell, the 2001 version of agile:

The four values of the Agile Manifesto. The idea is that what is on the left should be valued more than what is on the right.

Individuals and interactions over processes and tools
Working software over comprehensive documentation
Customer collaboration over contract negotiation
Responding to change over following a plan

The twelve principles behind the Agile Manifest that the signatories followed.

Today, “agile” left the dark chambers of software development to capture the attention of leaders across many industries.

These days there are countless frameworks and practices that ride the agile wave, but to be truly agile it’s more important to understand the thinking behind the agile concept, before deciding what methodologies are fit for purpose.

Agile 2.0

Agile 2.0 is the next iteration which comes from different authors who want “agile to pivot”. Given today’s use of agile and how it has been growing outside of its initial purpose, the initiative is understandable and laudable.

Agile 2.0 is more anchored in today’s digital world and puts greater emphasis on some areas that were missing or misunderstood in the first version.

It’s also more balanced and encourages a more holistic approach. For example, even though the first manifesto does not incite chaos by making the case of self-organizing teams, it fails to address the importance of leadership, which agile 2.0 wants to rectify. To get a better understanding of agile 2.0, you can read the principles on the dedicated page.

To summarize, “the agile way” refers to the ability to respond to change, adapt, build things in smaller cycles, get feedback, and unveil new opportunities.

Why Business Agility is More Relevant than Isolated Agile Practices

Agility promotes flexibility, collaboration and continuous improvement. It’s about adapting and responding quickly to changes. This is why it also helps increase the pace of innovation. Of course, easier said than done.

We have seen in the past twenty years how agile has outgrown its software development box. The problem is that most organizations that want to be agile are trying to fit a square peg in a round hole. This leads to frustrations especially on the receiving end, when employees are forced into these “agile ways” even though leadership did not set the stage for agile in the first place.

Instead of fixating on agile methods, the focus should be on how to scale the approach at a higher level through business, organizational and enterprise agility. They might seem one and the same thing, but there are nuances that differentiate the three.

While business agility focuses on operational responsiveness, organizational agility emphasizes cultural and structural adaptability, and enterprise agility encompasses a broader perspective, incorporating external relationships and ecosystem dynamics in addition to internal capabilities.

In all three scenarios, achieving an extensive agile transformation is a highly complex journey and requires a top-down approach. However, it doesn’t mean that agility can’t also be achieved bottom-up, outside the IT department. In our work with customers, we see many innovation champions who put the wheels in motion through their determination and commitment to embrace agility.

Even though the agile concept is used as a badge of honor by many organizations, it’s still highly misunderstood.

That’s why it’s also important to understand not just what agile is, but also what is not.

What is NOT Agile

Scaling agile thinking organisation-wide it’s very difficult and hard to achieve. One reason is the lack of direction. Leaders and managers rush into methodologies and frameworks that sound good because others seem to be successful in implementing those. But more often than not, they forget to ask themselves why they want to be agile in the first place. Is it for the right reasons? Is there a good understanding of agile before bringing on board an agile coach?

Using Kanban, organizing Sprints, and hiring Scrum Masters will not automatically make you more agile. It’s important to understand agile holistically and put it into context before getting to the actual tactics and tools.

Start by asking yourself, what do you want to achieve, and what problems you want to solve with agile?

If your goal is to increase efficiency, deliver more or faster, increase productivity, or quality, there are plenty of other methods that can help you achieve this. Agile can contribute to these, but it’s not a prerequisite.

Agility is primarily about adaptability and changing conditions. So, the main reason for considering the agile approach should be market responsiveness: your organization’s ability to adapt rapidly to changes that are happening in the market.

Without clearly understanding the above, it’s easy to see how, for many organizations, agile became synonymous with processes like scrum.

Just to give a bit of context, Scrum is the most popular method (even though it precedes the Agile manifesto) used now by agile practitioners. It’s an iterative framework that brings small teams together to find adaptive solutions for complex problems.

A scrum process is built around product innovation and works best when there is a lot of uncertainty, and you don’t know which way your product should go.

In Scrum, work is organized into short iterations called sprints, usually lasting 2-4 weeks, during which a cross-functional team works to complete a set of tasks or goals. Sprints have been adopted by other departments too, not just those working on product development.

But whether these can be successfully implemented outside of software development and scaled to other departments, is still a matter of debate. We’ll explore the reasons behind this in the next section where we dissect the challenges and pitfalls of agile.

Bottom line, scrum is most suited for exploration and validation of assumptions. Scrum is not about speed, efficiency, and predictability. If you’re in a highly exploratory environment Scrum is a valuable practice.

Then there are those teams that proclaim their agility through Kanban. We explained the tool in greater detail here, where we show how it’s used to improve flow efficiency and optimize operations.

While it can be a highly valuable tool within the agile transformation, Kanban on its own is not enough to increase agility.

So, while these are very popular agile practices, useful in their own right, they don’t have the power of embedding agility at the core of the business.

What does this all have to do with innovation management and how can you actually drive agility to innovate? Something to explore in the next article.

Article originally published on viima.com/blog

Image credit: Unsplash.com, viima.com

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Will Innovation Management Leverage AI in the Future?

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Will Innovation Management Leverage AI in the Future?

GUEST POST from Jesse Nieminen

What role can AI play in innovation management, and how can we unlock its true potential?

Unless you’ve been living under a rock, you’ve probably heard a thing or two about AI in the last year. The launch of ChatGPT has supercharged the hype around AI, and now we’re seeing dramatic progress at a pace unlike anything that’s come before.

For those of us into innovation, it’s an exciting time.

Much has been said about the topic at large so I won’t go over the details here. At HYPE, what we’re most excited about is what AI can do for innovation management specifically. We’ve had AI capabilities for years, and have been looking into the topic at large for quite some time.

Here, I share HYPE’s current thinking and answer some key questions:

What can AI do for innovation management?
What are some common use cases?
How can you operationalize AI’s use in innovation management?

The Current State of Innovation Management

Before we answer those questions, let’s review how most organizations carry out innovation management.

We’re all familiar with the innovation funnel.

Hype Innovation Image 1

To oversimplify, you gather ideas, review them, and then select the best ones to move forward to the pilot stage and eventual implementation. After each phase, poor ideas get weeded out.

It’s systematic, it’s conceptually simple, and investment is tiered so that you don’t spend too much time or money before an idea has shown its potential. What’s not to love?

Well, there are a few key challenges: the process is slow, linear, and is usually biased due to the evaluation criteria selected for the gates or decision points (if you use a Phase-Gate model).

Each of these challenges can be mitigated with smart adaptations of the process, but the funnel has another fundamental limitation: It’s generally built for a world where innovation requires significant capital expenditures and vast amounts of proprietary information.

But, regardless of your industry, that just isn’t the case anymore. Now most information is freely available, and technology has come a long way, in many cases because of AI. For example, pharmaceutical companies use AI to accelerate drug discovery while infrastructure and manufacturing companies use advanced simulation techniques, digital twins (virtual replicas of physical objects or systems), and rapid prototyping.

It’s now possible to innovate, test, and validate ideas faster than ever with minimal investment. With the right guidance, these tasks don’t have to be limited to innovation experts like you anymore. That can be an intimidating thought, but it’s also an empowering one. Soon, thanks to AI, you’ll be able to scale your expertise and make an impact significantly bigger than before.

For more than 20 years, we’ve been helping our customers succeed in this era of systematic innovation management. Today, countless organizations manage trends at scale, collect insights and ideas from a wide and diverse audience, and then manage that funnel highly effectively.

Yet, despite, or maybe because of this, more and more seemingly well-run organizations are struggling to keep up and adapt to the future.

What gives?

Some say that innovation is decelerating. Research reveals that as technology gets more complex, coming up with the next big scientific breakthrough is likely to require more and more investment, which makes intuitive sense. This type of research is actually about invention, not innovation per se.

Innovation is using those inventions to drive measurable value. The economic impact of these inventions has always come and gone in waves, as highlighted in ARK Investment’s research, illustrated below.

Throughout history, significant inventions have created platforms that enable dramatic progress through their practical application or, in other words, through innovation. ARK firmly believes that we’re on the precipice of another such wave and one that is likely to be bigger than any that has come before. AI is probably the most important of these platforms, but it’s not the only one.

Mckinsey Hype Innovation Image 2

Whether that will be the case remains to be seen, but regardless, the economic impact of innovation typically derives from the creative combination of existing “building blocks,” be they technologies, processes, or experiences.

Famously, the more such building blocks, or types of innovation, you combine to solve a specific pain point or challenge holistically, the more successful you’re likely to be. Thanks to more and more information and technology becoming free or highly affordable worldwide, change has accelerated rapidly in most industries.

That’s why, despite the evident deceleration of scientific progress in many industries, companies have to fight harder to stay relevant and change dramatically more quickly, as evidenced by the average tenure of S&P500 companies dropping like a stone.

Hype Innovation 3

In most industries, sustainable competitive advantages are a thing of the past. Now, it’s all about strategically planning for, as well as adapting to, change. This is what’s known as transient advantage, and it’s already a reality for most organizations.

How Innovation Management Needs to Change

In this landscape, the traditional innovation funnel isn’t cutting it anymore. Organizations can’t just focus on research and then turn that into new products and expect to do well.

To be clear, that doesn’t mean that the funnel no longer works, just that managing it well is no longer enough. It’s now table stakes. With that approach, innovating better than the next company is getting harder and more expensive.

When we look at our most successful customers and the most successful companies in the world in general, they have several things in common:

They have significantly faster cycle times than the competition at every step of the innovation process, i.e., they simply move faster.
For them, innovation is not a team, department, or process. It’s an activity the entire organization undertakes.
As such, they innovate everything, not just their products but also processes, experiences, business models, and more.

When you put these together, the pace of innovation leaves the competition in the dust.

How can you then maximize the pace of innovation at your organization? In a nutshell, it comes down to having:

A well-structured and streamlined set of processes for different kinds of innovation;
Appropriate tools, techniques, capabilities, and structures to support each of these processes;
A strategy and culture that values innovation;
A network of partners to accelerate learning and progress.

With these components in place, you’ll empower most people in the organization to deliver innovation, not just come up with ideas, and that makes all the difference in the world.

Hype Innovation 4

What Role Does AI Play in Innovation Management?

In the last couple of years, we’ve seen massive advancements not just in the quality of AI models and tools, but especially in the affordability and ease of their application. What used to be feasible for just a handful of the biggest and wealthiest companies out there is now quickly commoditizing. Generative AI, which has attracted most of the buzz, is merely the tip of the iceberg.

In just a few years, AI is likely to play a transformative role in the products and services most organizations provide.

For innovation managers too, AI will have dramatic and widely applicable benefits by speeding up and improving the way you work and innovate.

Let’s dive a bit deeper.

AI as an Accelerator

At HYPE, because we believe that using AI as a tool is something every organization that wants to innovate needs to do, we’ve been focusing on applying it to innovation management for some time. For example, we’ve identified and built a plethora of use cases where AI can be helpful, and it’s not just about generative AI. Other types of models and approaches still have their place as well.

There are too many use cases to cover here in detail, but we generally view AI’s use as falling into three buckets:

Augmenting: AI can augment human creativity, uncover new perspectives, kickstart work, help alleviate some of the inevitable biases, and make top-notch coaching available for everyone.
Assisting: AI-powered tools can assist innovators in research and ideation, summarize large amounts of information quickly, provide feedback, and help find, analyze, and make the most of vast quantities of structured or unstructured information.
Automating: AI can automate both routine and challenging work, to improve the speed and efficiency at which you can operate and save time so that you can focus on the value-added tasks at the heart of innovation.

In a nutshell, with the right AI tools, you can move faster, make smarter decisions, and operate more efficiently across virtually every part of the innovation management process.

While effective on their own, it’s only by putting the “three As” together and operationalizing them across the organization that you can unlock the full power of AI and take your innovation work to the next level.

In a nutshell, with the right AI tools, you can move faster, make smarter decisions, and operate more efficiently across virtually every part of the innovation management process.

Putting AI Into Practice

So, what’s the key to success with AI?

At HYPE, we think the key is understanding that AI is not just one “big thing.” It’s a versatile and powerful enabling technology that has become considerably cheaper and will likely continue on the same trajectory.

There are significant opportunities for using AI to deliver more value for customers, but organizations need the right data and talent to maximize the opportunities and to enable AI to support how their business operates, not least in the field of innovation management. It’s essential to find the right ways to apply AI to specific business needs; just asking everybody to use ChatGPT won’t cut it.

The anecdotal evidence we’re hearing highlights that learning to use a plethora of different AI tools and operationalizing these across an organization can often become challenging, time-consuming, and expensive.

To overcome these issues, there’s a real benefit in finding ways to operationalize AI as a part of the tools and processes you already use. And that’s where we believe The HYPE Suite with its built-in AI capabilities can make a big difference for our customers.

Final Thoughts

At the start of this article, we asked “Is AI the future of innovation management?”

In short, we think the answer is yes. But the question misses the real point.

Almost everyone is already using AI in at least some way, and over time, it will be everywhere. As an enabling technology, it’s a bit like computers or the Internet: Sure, you can innovate without them, but if everyone else uses them and you don’t, you’ll be slower and end up with a worse outcome.

The real question is how well you use and operationalize AI to support your innovation ambitions, whatever they may be. Using AI in combination with the right tools and processes, you can innovate better and faster than the competition.

At HYPE, we have many AI features in our development roadmap that will complement the software solutions we already have in place. Please reach out to us if you’d like to get an early sneak peek into what’s coming up!

Originally published at https://www.hypeinnovation.com.

Image credits: Pixabay, Hype, McKinsey

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Innovation Management ISO 56000 Series Explained

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Innovation Management ISO 56000 Series Explained

GUEST POST from Diana Porumboiu

Are you one of the 84% of leaders who prioritizes innovation, yet you find your organization’s performance lacking in this area? It’s a familiar conundrum: How do we consistently create lasting impact, generate value, and achieve successful innovation?

The quest for an innovation recipe has been gaining momentum, but is it truly possible to standardize innovation?

The innovation standards that ISO (International Organization for Standardization) started to introduce in 2019 are promising just that.

Are the new ISO standards for innovation truly valuable? And if so, does it make sense to adopt them in the future? These questions don’t have easy answers, so in this article, we’ll delve into the ISO 56000 suite of innovation standards to uncover the good, the bad, and the ugly.

What exactly is the ISO standard for innovation? Who is it designed for? Should your organization consider adhering to these standards? We’ll weigh the pros and cons and provide insights into what it means in practice to be ISO 56000 compliant and whether they have the potential to transform the way you approach innovation.

The paradox of standardizing innovation

When we talk about innovation and standards, we should first clarify a few concepts.

What is innovation?
Why should you manage innovation?
What is a standard in the context of innovation?

First, if you wish to transform the way you innovate, it is crucial to establish a shared understanding of what innovation means for you.

In its simplest form, the Merriam-Webster dictionary defines innovation as the introduction of something new. However, there are many types of innovation and therefore, ways of innovating. That’s why it’s important to define it within the context of your organization, your goals, and strategy.

Also, note that innovation is not just an ingredient you add to the mix and hope for a better result than before. It has to be placed at the core of the organization. That’s where innovation management comes into play.

Innovation has to be placed at the core of the organization.

Innovation management is the process through which you get to create and introduce that “something new”. This process can look different from one organization to another, which makes it more challenging to see it in perspective.

We usually structure the core aspects of innovation management into capabilities, structure, culture, and strategy. However, the International Standards for Innovation expand them further into eight principles.

eight principles of innovation management

We previously explored each of these topics in detail on our blog, as they all contribute to successful innovation. But maybe the most important one, which should be your North Star, is the creation of value. Unless you add value, you are simply creating innovation theater.

Unfortunately, this is very common in organizations attempting to innovate through sporadic activities. But innovation is a complex, dynamic process that evolves over time.

At the same time, it’s understandable why the skepticism around the standards for innovation. Just as innovation is not easy, neither is adhering to a set of standards that will help you succeed at it.

Obviously, standards come with both downsides and benefits, but as pointed out in the ISO documentation, these innovation management principles are “an open set to be integrated and adapted within the organization”.

Naturally, now you might question how standardization is possible if innovation and its management are so complex and can vary so greatly across organizations and industries.

The problem is that traditionally, innovation has been seen as a creative and sometimes chaotic process that may or may not result in something new that adds value.

However, if we take a closer look at some of the most innovative companies, we see that it’s not about randomly generating wild ideas and hoping for the best.

The myth of the crazy innovator has been popularized by the media that portrays innovators as superheroes. This stereotypical view on innovation fed the belief that innovation and standardization are two opposing forces. Innovation comes from pure chaos, and standards fight it with order. In fact, creativity and standardization can be complementary. You need both for successful corporate management.

Creativity and standardization can be complementary. You need both for successful corporate management.

For example, even though Apple marketed itself as a group of rebels revolutionizing the computer, Steve Jobs actually instilled a disciplined culture where people had to adhere to his methods. In a way, he had his own set of standards for what an innovative product meant.

Similarly, Toyota, renowned for its enduring success, has developed its own system called “The Toyota Way”. Through this system, they have embraced continuous improvement as an approach to innovation, refining it into a set of principles that have become synonymous with their brand.

If it wasn’t for Toyota’s systematic approach to innovation, and Jobs’ eccentricity who insisted on doing things a certain way, today we might have had two very different companies.

Even though their way is by no means a “recipe” that can be replicated by others, we can see how having a framework sets the tone for how an organization is innovating on the long term.

Efforts have been ongoing to develop a comprehensive framework that can be universally adopted by organizations of all sizes and industries. The International Organization for Standardization (ISO) has taken a significant step in this direction with the introduction of the ISO 56000 suite of innovation standards.

Let’s next take a closer look at these standards to see if they have any practical benefits.

ISO 56000 Suite for Innovation

In essence, standards are meant to be a reference point for organizations, industries, and individuals. They are used to establish best practices, promote efficiency, enhance safety, and facilitate communication and cooperation. Even though they could seem just rigid rules, standards are simply ways of working and they are not meant to hinder creativity.

Where did the ISO standards for innovation come from? The International Organization for Standardization (ISO) is developing and promoting international standards that facilitate consistency, interoperability, and quality across various industries and sectors.

The ISO 56000 series of standards for innovation is a rather new initiative where experts from 50 countries came together in an effort to establish a common understanding of innovation and support organizations across all industries to improve their ability to survive and thrive in this uncertain world.

Also, note that some standards from the eight-part series are still under development (as per July 2023), so we will get back and update this article when necessary. If you consider complying with these standards, the ISO website is the official source to get them in full.

However, the standards we believe to be the most relevant in helping you succeed have already been published:

ISO 56000 Innovation Management – Fundamentals and vocabulary
ISO 56002 Innovation management – Innovation management system
ISO 56003 Tools and Methods for innovation partnership.

For a better understanding of the use and purpose of the ISO standards, let’s focus on the ISO 56000 Fundamentals and vocabulary, and the ISO 56002 for Innovation management system.

ISO 56000 Innovation management — Fundamentals and vocabulary:

Provides vocabulary, fundamental concepts, and principles of innovation management and its systematic implementation.
Applicable to various organizations, including those implementing an innovation management system, seeking to improve their innovation capabilities, or aiming for effective communication and common understanding in innovation management.
Suitable also for providers of training in, assessment of, or consultancy for, innovation management and innovation management systems.
It can be applied by all types of organizations, regardless of the sector, size, or maturity level. It’s useful for different types of innovations (product, services, processes, etc), and approaches (internal, open, design-driven, etc.)

ISO 56002 Innovation management system

Provides guidance for establishing, implementing, maintaining, and improving an innovation management system in established organizations.
Applicable to organizations seeking sustained success in managing innovation activities, interested parties assessing innovation capabilities, and policymakers supporting innovation and competitiveness.
Provides generic guidance applicable to all types of organizations, innovations, and approaches, with a focus on established organizations.
This standard goes beyond the foundational principles and offers more practical guidance on how to structure, implement, and continuously improve innovation processes. It emphasizes the importance of leadership, communication, and organizational culture in fostering innovation.
However, it does not prescribe specific activities, requirements, tools, or methods for innovation but offers general-level guidance.

How does this translate into innovation practices? Well, let’s take a step back and look at how most organizations approach innovation.

Traditionally, many organizations innovate by focusing primarily on episodic events that are centered around ideas. These could be hackathons, suggestion boxes, idea challenges, brainstorming sessions, or similar events. Something could come out of these sporadic activities, but mostly they turn out to be wasted efforts and resources.

Truth be told, ideas are not worth much. The execution is more important. The issue with the old, funnel approach, which is mostly about collecting numerous ideas, filtering, evaluating, and selecting a few for implementation, is that it can overlook the essence of innovation and focus on the wrong things.

Innovation at the corporate level is not, or should not be, just about creating something new for the sake of novelty. That is an invention and not all inventions are innovations. Instead, innovation should create value and align with the overall business strategy and goals.

All in all, the traditional funnel works fine at the ideation level, but is not an all-encompassing system to repeatedly innovate at an organizational level.

ISO 56002 brings together all the elements that can enable value creation through innovation. The innovation management system, which is at the core of the ISO 56002 is made of different interrelated elements that make up the framework on which an organization can develop and deploy innovation capabilities, evaluate performance, and achieve the intended goals.

Source: ISO 56002 Innovation Management System: https://www.iso.org/obp/ui/en/#iso:std:iso:56002:ed-1:v1:en

As shown in this graphic, the innovation management system can be very complex, especially for larger, more established organizations.

The good news is that you don’t have to adopt all the elements at once. You can gradually integrate them to create a system that works for your organization and its specific context. As their guideline indicates, it all starts with committing and promoting the capabilities required to create such a system.

If you’ve read our articles before, you probably noticed that we talked extensively about continuous improvement, as well as the tools and processes that drive sustained innovation. So, it’s no surprise that the ISO 56002 also integrates the PDCA (Plan – Do – Check – Act) cycle, which enables continuous improvement of the innovation practices.

This model also ties together the business strategy with the innovation strategy. It gives insights into the intent and where the innovation activities should be directed.

So, instead of collecting ideas for projects that may not add anything valuable to the bottom line, you should generate ideas based on opportunities.

In broad terms, this is how standardization can enable innovation. It’s not about a “to do” list, but about the bigger picture. The ISO 56000 suite highlights the need for an end-to-end approach to innovation, where barriers are removed, and creativity can flourish. It enables the conditions for innovation to thrive.

It’s great to see there is this attempt to establish a foundation for managing innovation as a process, through a holistic approach. Even so, there are still shortcomings that sceptics of the ISO standards are right to be concerned about. Let’s see what those are.

The Pros and Cons of ISO Standards for Innovation

What should you know before deciding to make the leap, and what are the downsides of adhering to ISO standards for innovation? Also, what are the benefits, and is it worth investing the effort, time, energy, and resources? Let’s see.

The downsides of ISO standards for innovation

Limited scope

Innovation is multifaceted and complex and the road to success looks very different for each organization. The size, industry, and specific goals of each organization mean that the processes required to innovate can also look very different. Adopting a set of standards with such a broad scope can be very challenging for organizations.

ISO 56000 lays the ground to define fundamental concepts and vocabulary, ISO 56002 provides guidance for establishing and implementing an innovation management system and ISO 56003 focuses on specific types of innovation. Even though they attempt to provide guidance in different scenarios, they still cannot fully address every organization’s unique needs.

That’s why you need committed, knowledgeable leaders who can show the way and understand how to adapt the system to the specifics of their organization.

Not a playbook for success

It should be clarified that even if you adhere to these standards and you put in all the work, the ISO standards are not a playbook for success.

The impact of implementing these standards can vary from one organization to another depending on the industry, maturity of the innovation practices, size, culture, and so on.

So, it’s important to set the expectations right and to take them for what they are. These standards can help you move ahead, but they won’t provide the recipe for disruptive or radical innovations, which can truly set you apart.

Rigidity and too much focus on compliance

A lack of flexibility is on the top of leaders’ minds when they think of standards. Employees also fear that being compliant with specific standards will take away from the flexibility and freedom to think creatively or try unconventional approaches.

But having constraints is not all bad. In fact, constraints can foster creativity. Having constraints can help you understand the problem better, it can force you to be creative and think outside the box, and can ultimately turn into a source of competitive advantage.

Costs and resources

The process of implementing ISO innovation standards can be time-consuming, complex, and costly. It requires allocating resources for conducting assessments, audits, and certifications, which can be a burden for smaller organizations with limited budgets. Other costs may include purchasing the standards, training employees on their implementation, and conducting internal assessments to ensure compliance.

What’s more, adhering to new standards involves a significant commitment of time and effort. Developing new processes, aligning existing practices with the standards, and undergoing audits or assessments demand substantial dedication. This can strain resources and may divert attention from other critical business activities.

Workforce resistance

Embracing ISO standards often require organizational change, which can encounter resistance from employees and management. Change management efforts are essential to successfully integrate the standards, but they can add complexity and take time to fully adopt the new practices.

Leadership commitment is essential and their approach to enforcing change can make or break the initiative. If the standards will be imposed rules, they can become a cause of friction between leaders and employees.

Despite these downsides, it’s important to recognize that investment in ISO standards can bring substantial benefits. What kind of benefits?

Benefits of Adopting ISO Standards for Innovation

Enhanced Innovation Management Practices

With the ISO standards you get the guidance and framework to develop more efficient and structured innovation management processes.

With such a complex endeavor it’s so easy to get lost in the details and forget the big picture. The ISO 56002 standards provide the guidelines on how to ideate, evaluate, and implement innovative ideas, leading to better utilization of resources and increased innovation success rates.

Improved Governance and Organizational Structure

Without structures in place there is no common understanding of how the organization understands innovation. There are inconsistent practices, fragmented activities that lead to no results, and no clear direction or alignment with the overall strategy.

The ISO standards are like a map, showing the team the best route to take and ensuring everyone is on the same page.

Armed with these guidelines, organizations establish a smoother and more organized innovation process. Everyone knows their roles and responsibilities, communication flows better, and collaboration becomes easier. It’s like having a well-oiled machine, where everyone knows what to do and how they fit into the bigger picture.

The ISO standards also emphasize the importance of leadership and accountability. Leaders take charge and guide the innovation process, while everyone is responsible for their part in making innovation successful. For innovation to succeed, you need a strong captain steering the ship and a crew that works together.

Increased Competitiveness and Growth

Armed with these standards, you can identify new opportunities, develop innovative products or services, and gain a competitive advantage.

Standards act as a roadmap, guiding you towards effective strategies and practices that fuel the competitive edge. As we saw in the overall structure of the ISO 56002, it promotes a culture of continuous improvement and learning within organizations. This encourages the exploration of new ideas, the identification of areas for growth, and the development of innovative solutions. It enables organizations to stay agile, responsive, and innovative in a rapidly evolving business landscape.

Better Ability to Manage Risk

The concept of risk is too often seen as purely a negative issue that one should look to minimize by diversifying the innovation portfolio. Instead, you should look at risk through a broader lens, especially when it comes to innovation.

Risk is the potential of something either gaining or losing value, which means that it simply represents the uncertainty related to that something. Since working on innovation involves a lot of uncertainty, you should look at risk as more than just something to minimize. Of course, the acceptable level of risk depends on ambition, capabilities, and the types of innovations pursued.

Since working on innovation involves a lot of uncertainty, you should look at risk as more than just something to minimize.

For example, startups, particularly early-stage ones, are often more willing to take significant risks by dedicating all their resources to a single ambitious project with a high likelihood of failure but the potential for substantial rewards.

Therefore, even in the context of standards, flexibility and adaptability are crucial. You have to establish unified or separate structures for innovation activities with different leadership styles, competencies, and cultures.

Implementing an innovation management system challenges the status quo, enabling effective management of uncertainties and risks.

Ability to Forge Meaningful and Valuable Partnerships

ISO standards help organizations forge meaningful and valuable partnerships by providing a common framework and shared language for collaboration.

The ISO 56003 can help you decide whether you should enter an innovation partnership, identify, evaluate, and select partners and assess the alignment and perceptions of value and challenges of the partnership.

Even more, through ISO standards organizations can also demonstrate their commitment to best practices and a high level of quality in their operations. This can attract potential partners who value reliability and trustworthiness. When partners see that an organization follows recognized standards, it gives them confidence that they can work together effectively and achieve mutually beneficial outcomes.

When organizations follow these standards, they can collaborate more efficiently and make better decisions together. This fosters trust and strengthens the partnership, leading to more successful projects and innovations.

Effective Intellectual Property Management

IP management is like a safety net for new ideas and inventions. It protects them from being copied or used by others without permission. When innovators get patents, trademarks, copyrights, or keep their secrets, it gives them legal rights over their creations. This protection encourages them to invest in more research and come up with even better things.

If you are concerned about IP management, the ISO 56005 was developed as a guidance and framework to address the management of intellectual property rights.

Clear guidelines for IP management can help you protect and capitalize on your innovations. The ISO 56005 explains the steps to carry out an IP order and create an IP strategy that aligns with your business goals.

Overall, the adoption of innovation standards paves the way for continuous improvement, growth, and impactful collaborations in today’s dynamic and rapidly evolving business landscape. But ultimately, the decision to invest in the ISO standards for innovation depends on your objectives, resources, and long-term commitment to continuous improvement.

What Next?

Now that you know what’s the deal with these ISO standards for innovation, what should you do next?

Assess Readiness: Begin by evaluating your organization’s readiness for implementing standards for innovation. It’s important to understand why transformation is necessary. Assess factors such as your maturity as an organization, your current innovation practices, resources, and commitment to driving innovation improvements.
Familiarize Yourself with the ISO Standards: Take the time to understand the ISO standards relevant to innovation, such as ISO 56000 and its related standards. Familiarize yourself with the content as much as possible to understand where to start.

Note that you don’t have to get on board with all standards. If you are new to innovation work, you might want to start with the ISO 56000 to establish the concepts of innovation in relation to your organization. From there you will get more familiar with the topic and start to understand the basics.
Define Objectives and Benefits: If you already know you want to adopt ISO standards, make sure you have defined the objectives you aim to achieve. Consider the potential benefits for your organization, such as improved innovation management practices, enhanced competitiveness, and better risk management.
Gain Leadership Commitment: Having that clear understanding of what you want to achieve through the standards will also help secure leadership commitment, which is vital for the successful adoption of ISO standards. Engage top management, to gain their support and endorsement of the initiative.
Make a Plan: Next, develop a detailed plan for implementing ISO standards for innovation. The plan should outline the steps, timelines, responsibilities, and resources required for successful implementation.
Engage Stakeholders: Involve all relevant stakeholders in the process. Seek input from employees, teams, and departments that will be impacted by the adoption of ISO standards to ensure their buy-in and cooperation. Offer training and awareness programs to employees to ensure they understand the importance and benefits of adopting these ISO standards.
Continuous Improvement: As the innovation management system proposed by the ISO organization also outlines, continuous improvement is the backbone of any process. Once you execute the plan and start adhering to innovation standards, you should monitor progress, measure outcomes, and continually assess and improve your innovation management practices.
Consider Certification: Lastly, the elephant in the room. Whenever you think of ISO standards you think of the ISO certificates. While certification can signal a commitment to best practices and continuous improvement in innovation management, it is not mandatory for implementing effective innovation initiatives within an organization.

You can adhere to the standards without additional investment into getting certified. The ISO 56002 is the only one that is eligible for certification, meaning that you can seek certification from accredited certification bodies to demonstrate your compliance with ISO 56002 as well as your commitment to effective innovation management.

Conclusion

Because we don’t like to do things halfway, this was a lengthy article. We didn’t go into the details of each standard because that is beside the point here. Our goal was to provide you with the bigger picture of what it means to standardize innovation practices.

This will hopefully help you better understand that innovation is not a one-time activity you do after a workshop, and that a systematic approach is essential for long-term success and growth.

Innovation can be like deciding to go to the gym or sticking to a workout routine. Sometimes the most difficult part is to get started and make that first step.

With this information at hand, you can start digging deeper into the specifics of each standard that interests you and use them as a compass to steer you in the right direction. They can give a new perspective into the methods you can use to achieve success in innovation, and help you rethink how you manage innovation at an organizational level.

Image credit: Unsplash.com, Pixabay, viima.com, iso.org

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The Ultimate Guide to the Phase-Gate Process

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The Ultimate Guide to the Phase-Gate Process

GUEST POST from Dainora Jociute

While improvisation might bring the zest to a comedy performance or to your Saturday night’s Bolognese sauce, in the world of innovation a systematic approach is the way to go. And the zest here is a fitting and well-thought-through innovation management process.

It has been a hot minute since we last covered the topic. So, for the New Year, we will dust off our knowledge and insights and share updated guides to innovation management techniques.

In this guide, we will take a deep dive into the Phase-Gate process, arguably one of the best-known innovation management techniques. What is it, and why it might be just the right approach to innovation management for your organization? Let’s jump right into it.

What is the Phase-Gate Process?

A more linear, sequential approach such as the Phase-Gate process to product innovation and management isn’t all that new.

Already in the mid-20^th century, engineering companies were adapting a segmented manufacturing journey with the aim of better allocating their budgets or shutting down projects that are failing to deliver expected results.

However, a refined version of the Phase-Gate process (under the name Stage-Gate^© Discovery-to-Launch Process) was offered by Dr. Robert G. Cooper in the 1980s. It was originally introduced as a faster way to manage product innovation.

So, what exactly is the Phase-Gate process?

In short, it is a segmented (do-review) innovation management and New Product Development (NPD) technique. It is used to efficiently manage resources, prioritize initiatives, and lead the project from the early ideation steps, through development and prototyping to launch.

Cooper’s Stage-Gate process has a very specific and rigid structure, and while many use that term to refer to their management techniques, in reality, most organizations tweak the original structure and adapt it to their unique circumstances and ways of developing products.

Thus, any process that has a linear, segmented model with regular assessments and go/no-go decisions is commonly referred to as a Phase-Gate process.

How does it Work?

Since day one, the goal of the technique has been to divide a lengthy product development process into several well-defined steps (phases) to ease its evaluation along the way. Such an approach allowed managers to see whether the project is still on track to fulfill the promise of the initial idea or has it missed the perfect time to enter the market.

Just like with anything popular and well-known, the Phase-Gate process attracts a healthy amount of criticism. It is mainly criticized for its rigid structure which can stifle creativity since it is based on extensive research, detailed planning, and continuous double-checking. However, this strict structure and frequent check-ins are also the reason why the Phase-Gate is still popular, decades after its introduction.

Regular review processes allow organizations to identify and address issues early in the development stage. If any shortcomings would be discovered during the regular check-ins (gates), the project would be killed, paused, or sent back for a rework. In return, the elimination of weak projects would allow the organization to save time and money, as well as unlock more value by reallocating resources to more lucrative ideas.

Likewise, a project deemed valuable and promising would be green-lighted and would proceed to the next phase, be it prototyping, testing or launch.

At the end of the day, the Phase-Gate process gives an opportunity for the organization to manage the development of a product systematically and efficiently, minimizing risks, and ensuring that resources get allocated to the most viable projects, thus increasing the chances of the overall innovation portfolio being successful.

The objective of the Phase-Gate process is to minimize risks in product or service development, allocate resources more efficiently, and increase the overall chance of success for the innovation portfolio.

Who Can Benefit from Using the Phase-Gate Process?

The Phase-Gate process can be a great fit for big organizations where a hefty upfront investment (time /money) is typically needed to deliver a product to the market, or in industries where there are specific regulatory constraints.

For example, complicated projects like developing and manufacturing a new drug, or a smartphone device while difficult and requiring a very diligent, well-coordinated approach, are fundamentally predictable, hence they can be successfully planned out in advance and benefit from the Phase-Gate process.

So, common examples of industries where the process is used include the pharmaceutical sector, construction industry, electronics, manufacturing, and similar. Usually, as the applicable industries indicate, those organizations are quite large.

On the other hand, if you are running a low-risk project or a complex, disruptive initiative, the Phase-Gate process might become burdensome and too time-consuming.

A good example of low-risk cases might be any small incremental improvements to an existing product, a customer pre-ordering or committing to a contract, then part of the risk consideration is the customer’s responsibility, and rigorous gatekeeping becomes counterproductive.

Complex projects, on the other hand, such as creating a completely new type of business, a disruptive product, etc. are all unpredictable. It means that you can’t know in advance how changing one thing will affect another, so it’s nearly impossible to plan in advance. For these situations, more iterative and agile methods are likely to win against the Phase-Gate technique.

Thus, it is important to know when to adapt the Phase-Gate process to your own projects and when to green-light small endeavors from the get-go and just see them unfold.

While its roots and main benefits come from and for NPD processes, any complicated and time-consuming project can benefit from a well-structured Phase-Gate approach.

any complicated and time-consuming project can benefit from a well-structured Phase-Gate approach

Even in unpredictable projects, key ideas of the process can be useful, shifting focus on eliminating risks one at a time and granting funding in tiers as the team makes progress, not all at once.

To get a better understanding of what parts of the process could be used and when, let’s take a look at all its elements one by one.

The Structure of the Phase-Gate Process

To kick off the Phase-Gate process, you need to have an idea. It can derive from early-stage brainstorming sessions, a fruitful chat over coffee, or maybe even a well-planned ideation process. Either way, this idea-generation period in the Phase-Gate process is called the discovery phase or phase 0.

In an innovation process, the discovery focuses on identifying the right problem or opportunity to address. On top of all the brainstorming and creative thinking, it often includes a lot of field research.

Once you have the idea, you then work toward scoping it (phase 1), ensuring it is feasible (phase 2), developing (phase 3), testing and validating (phase 4), then finally launching it (phase 5). So, in total, the Phase-Gate process consists of six distinct idea development steps: discovery, scoping, feasibility, development, validation, and launch.

The Phase-Gate process consists of six distinct idea development steps: discovery, scoping, feasibility, development, validation, and launch

In addition, there are five continuous and one post-project review point – the so-called gates. Gates are pre-defined checkpoints where decision-makers assess the progress of the process and decide either to cancel the project or grant additional resources to it.

Viima Phase Gate 1

Thus, a review is necessary to harness the full value of your project. The gate review can also act as a short break for a difficult launch, pausing the development or sales process to implement fixes or improvements.

So, in short, the Phase-Gate process might look a little bit like this:

Discovery phase: an innovation opportunity is discovered, and the initial idea is screened for the first time.
Scoping phase: if the idea passes the first gate, the scope will be defined. The idea is thus refined into a proper concept and screened for the second time.
Feasibility: accepted idea moves to the feasibility phase, where a business case is built, and the concept gets screened at the third gate.
Development and Validation: the innovation’s first prototypes are created and evaluated, and testing takes place.
Launch: when the innovation has been validated based on pre-defined criteria, it is launched to the market. After that, a post-launch review takes place

The above is a simplified version of a typical process. However, the Phase-Gate process can be molded to your unique needs, and many organizations indeed choose to do so.

But before we touch on that subject, let’s get a better understanding of each phase and the structure of the most common gates.

Discovery

First, to kick off the innovation process, you need ideas worth developing. In Phase-Gate, this step is called the discovery phase. Discovery creates a perfect environment for the ideation process, during which you and your team are generating and communicating ideas.

For NPD, where the Phase-Gate process is used the most, the discovery phase focuses on the problem or opportunity. Here, it is crucial to know what your potential customer’s needs and wants are. So, for that purpose, an organization can employ a framework such as the Jobs To Be Done theory.

It is worth noting that one should not limit themselves to ideas from their team only. Suggestions can come from outside your organization too, they can be sourced from inter-departmental brainstorming sessions, market research, collecting feedback from customers, suppliers, product teams, etc.

Scoping

In short, during the discovery, you generate a good idea, and during the Scoping phase, you map out some of the key risks and hypotheses associated with the idea and turn it into a tangible concept that you could start to develop.

During this step, the initial feasibility is considered, and market research is conducted. The Scoping phase is an excellent time to utilize SWOT or PESTEL analysis.

During the Scoping phase, it is crucial to understand the current supply and demand in the market, to determine what can be offered.

However, not every good-sounding idea is worth developing and during the scoping phase, it should be evaluated based on the organization’s priorities, not only the market fit.

Feasibility

The Feasibility phase (often referred to as Business Case or Business Viability) is the glue that pulls and holds your project together. In short, it is an important step of the Phase-Gate process, during which an actionable plan for the development of the product/service is created.

If your project gets the green light after this phase, it will move to the development step, thus use this time wisely and consider all “what ifs” in advance to avoid any possible hiccups.

The feasibility phase is complicated and time-consuming, and it is recommended to divide it into the following steps:

Viima Phase Gate 2

Product definition and analysis: one of the first steps is to determine whether the product is desirable and whether it solves the earlier discovered problem. User research during this step can help answer such crucial questions as how to satisfy customers’ needs and according to those, what features should the product have. Both quantitative and qualitative research should be conducted (i.e., interviews, surveys, and focus groups). Additional market and competitive analyses also take place during this phase.
Building the business case: a business case is a document that compares the project’s benefits against the costs, with a focus on whether the benefits truly outweigh the expenditure. It allows decision-makers to understand if the plan is realistic.
Feasibility study: While your business case analyses whether a project should be done, the feasibility study evaluates whether it could be. And at its core, it answers the simple yet key question: in case of launch, will the outcomes of the project justify the cost needed to develop it?
Building the project plan: your project plan will determine what, where, when, and by whom. Think of it as a schedule for your business plan, that overlooks all the steps that you will take to move through the Phase-Gate process. It covers resources needed to complete the project, estimating how much time it would take to develop, and test, and finally when to launch the product.

Development

The developing phase is meant to work on a “tangible” prototype of the new product or service. Design and development teams should work according to pre-set goals and clear KPIs. The SMART goals approach can be a useful tool to break down the process into actionable steps.

In addition to product/service development and design, it is time to focus on a marketing campaign and plan how to reach your target audience.

Early-stage (alpha- or lab-) testing might take place during the development phase. The ideal goal of this stage is to prepare an early working prototype, ready and set to go into the testing phase.

Validation

The goal of the Validation phase is naturally to validate your prototype and for that, testing takes place. It is important to determine whether the prototype delivers any value and did it really meet the needs and objectives defined in the earlier stages. This step is all about polishing the rough edges, testing marketing, and distribution channels, and testing processes around the product.

Early-stage testing took place in the previous phase, but now it is time to see the product in action and gather as much feedback as possible. You do not want to rush a half-operating, half-failing product to the launch phase hoping for the best. You want to be ahead of all the possible issues and during this phase, you should ensure the following tests are taking place:

Near Testing: Run an in-house test involving people who are familiar with the product and process. During this test, the focus is set on finding any issues or bugs and eliminating them before the product hits the market or even before it moves to the beta-testing step.
Field (Beta) Testing: This is the time for your project to leave its nest and get tested in a real-world setting. Typically, this testing involves your customers, partners or to play it super safe – internal staff that has never been part of the development process. The goal of beta testing is to see how testers are using the product, what features they like or find useless, and how much workload, wear and tear it can withhold. Flaws identified in this phase should get fixed.
Market Testing: Now that you have a perfected product, and you have a better understanding of how your future customers will use it, it is time to utilize this knowledge to adjust your earlier set marketing plan. Test several different marketing scenarios, positioning and messaging alternatives, different price points, and channels to see which ones seem to work the best. There is a plethora of different things to test and methods to use and the right ones depend on your unique situation and the hypothesis you need to test.

Launch

The validation step gives a chance to make the final tweaks and fixes to the project and if it passes the post-validation review step, it successfully moves to the launch phase.

However, while it sounds simple on paper, the launch phase is the step where all of the departments meet and have to work in perfect sync. Alongside the marketing department working their magic and the knowledgeable sales team, you must ensure the following are in order too: volume of production, methods, and channels for customer acquisition and delivery.

One thing that is important to plan for the launch is customer support. You might exhaust all the means of testing the product pre-launch, yet you will never be able to 100% predict how it will really behave in the market. In case your product gets a lot of attention, be it good or bad, a knowledgeable and dedicated support team will eliminate possible bottlenecks.

With that said, the launch phase is a long journey away from those first, shy ideation steps you take in the discovery phase. Your initial idea will be analyzed and scrutinized under a magnifying glass during the full Phase-Gate cycle and it will have to pass several gates first.

What is a Gate Review Process?

Traditionally, a project managed with the Phase-Gate process will go through 4 control gates (Idea Screening, Second Screening, Go-to- Development, Go-to-Market Test) until reaching the final pre-launch gate – Launch. If during the final gate, the project gets approved and reaches the launch phase, the last thing that should be done is a post-launch Review, which could be considered as the final gate.

However, the Phase-Gate process can be adapted to the individual organization’s needs and the number of gates can be increased. Or, if a company is using a simplified process for smaller scale projects – decreased. No matter which path you pick for your project, remember that the quality of your gates can determine the quality of your project.

The quality of the gate review process can determine the quality of the whole project.

Gatekeeping

Normally, people responsible for reviewing and gatekeeping the project depend on the organization’s size, type, and scope of the product. Usually, it is a cross-functional executive committee or a steering group.

In a nutshell, this group or person is responsible for ensuring that the project gets a green light to move forward or gets stopped. In addition, they provide feedback and guidance to the project development teams to help them identify risks and to avoid unnecessary mistakes.

For the gatekeeper, it is important to understand all practicalities around the project. While there is a budget to keep an eye on, the progress will be doomed if it’s just the numbers that get looked at. The gatekeeper needs to deeply understand the market, technology, and customers, not just compare business cases and pick the one with the bigger numbers.

Whether the organization assigns a committee or a single supervisor for the gate review process, the crucial part is to ensure that the gatekeeper is not directly related to the project (project sponsor, project manager), to avoid biased assessment.

During the gate review, resources, budget, KPIs, and other success criteria get decided for the next project development phase. In addition, each gate review provides the committee with an update on the status of their innovation portfolio. It also gives an opportunity for both sides of the project (the project team and the evaluating committee) to challenge one another or to have a discussion that would put them on the same page.

However, it should not become a battleground, but rather a safe space to focus on learning, and the clearer the goals and KPIs you have set, the easier to manage and more efficient the gate review process will be.

Assessment of the Quality of the Idea

Gate reviews are checkpoints for assessing the potential, risks, and progress of the project, and making the decision on whether or not to allocate additional resources to it. They also provide a great opportunity to share feedback with all teams involved. This review typically includes a few different steps:

Quality of execution: to evaluate the quality of execution of the previous phase.
Business Rationale: to determine whether the project can be fruitful considering the assessments performed beforehand. It should include a list of key assumptions or hypotheses that the idea relies upon to become successful.
If the project has issues or the assumptions are unrealistic the business rationale step in the gate assessment is when said issues get discovered, and unless a solution is found, the project gets killed.
Action Plan: to evaluate whether the expectations are reasonable and whether there are enough resources to implement all the planned or desired steps.
If the idea is feasible and just the resources are lacking, it is common to pause the project and re-assess it later.

Gate Review Components

The review process must be clear, strict, and simple to leave little to no space for maybes and to make it as easy as possible to weed out weak projects. Usually, it relies on a points-based evaluation system.

There are two groups of criteria for a gate review:

Must meet: Objectives that the project must include and meet at a certain point of the process. If the project failed to meet one, the project is killed (or paused) outright. Usually, it is a checklist of questions that can be answered either yes or no.
Should meet: Objectives that are desirable for the project to meet. While the first group is simple in its structure (no = kill, yes = greenlight), this criterion is evaluated on a point system. Each objective is given points worth and at the end of the step final points get calculated and compared to the in advance set marking system.

Gate Outcomes

There are 4 possible outcomes for each assessment step.

Go – the project is feasible enough to get the green light. The go phase should include an agreement on what the project should deliver in the next phase (having this in place will make the next gate review much easier).
Kill – the project is not feasible and gets shut down. If a project does not have sufficient merit – the kill decision should just put an end to it.
Hold or Pause – the project is considered feasible but not at the current time or state and gets put on hold.
Conditional Go or Rework – the project can proceed to the next phase only if it meets certain requirements and conditions after a rework.

Viima Phase Gate 3

Quite often the Phase-Gate process is seen in black and white – you either kill or launch a project. For some, the outcome is as clear as that, however, it is not the case for every project. Conditional Go is just as important and crucial an outcome as Go or Kill.

For example, some strategically important projects might be sent back for a rework several times just to make them truly viable and garner their full potential. And while to some working on the project, this back-and-forth might be seen as a challenge, it only means that the Phase-Gate process works as intended.

Remember – the gate process is not just a basic review. It is the decision-making point where the project might be completely rejected and killed and for some people, it might be a breaking point in their careers.

Of course, it is always best to nurture a safe environment at work, where a failed project is not seen as a personal problem or career killer, rather failed project should be seen as an opportunity for everyone to learn from mistakes and just improve upon future projects.

Viima Phase Gate 4

Challenges and Benefits of the Phase-Gate Process

As mentioned before, there are those who swear by the Phase-Gate, and there are those, who argue against it. If you are wondering, which camp should you be joining and whether the Phase-Gate would be the right innovation management technique for you, first consider the challenges and benefits of the process.

Challenges

The rigid structure lacks flexibility. As the traditional Phase-Gate process follows a strict flow and rigid review process, it can limit creativity, and lead some projects to spend too much on bureaucracy as opposed to solving the real problems. As development must follow a pre-agreed set of rules and creative changes might cause the project to be rejected during the gate review phase. So, at the end of the day, in some situations, the process can be too heavy and demotivating for innovators.
Can lead to a lack of customer focus. The Phase-Gate process might lead to tunnel vision both for the project developing team and the review committee. The prior might feel pressured to focus on checking off tasks on a strict to-do list before the Gate review phase, instead of focusing on the bigger picture and real customer needs, while the latter might focus too much on early-stage market research, unwilling to accept sorely needed changes later on in the process.
A narrow focus on the business case. Even if the project does fit all the business case set criteria, it means very little in the grand scheme of things. First, every business case is always wrong: some just a little, but some massively so. Plus, there is a built-in incentive for teams to game the numbers to get to work on the project and acquire more resources, so unless reviews are done well, all the wrong projects might get funded. Plus, it doesn’t really account for poor execution or scenarios like a competitor coming out with a similar product, the geopolitical environment changing, or customer preferences changing during the project.
Focus on short-term results and risk aversion. The Phase-Gate process is designed to reduce risk and increase the project’s chances of success, but that can sometimes lead to undesirable biases. It can be tempting to reject a project on the grounds that it is too costly and instead, invest money in easy-to-predict improvements on existing products. In such cases, a risky and unpredictable innovation that might generate the most profit might always lose in favor of quick, predictable, and short-term oriented projects.
Competitive and divisive approach. The Phase-Gate process might create a competitive environment where teams are battling for funding for their project against one another, as well as create “sides” – one that develops the project and another that evaluates it. So, instead of innovation being a strategic pursuit of common goals for everyone in the organization, it might create tension, division, and competition instead.
Not accepting any unpredictability. In many cases, it’s impossible to gather all the evidence before making decisions related to innovation. Some companies strive to eliminate all uncertainty or require detailed business cases for everything when it might be impossible to create it accurately early on in the process. This is highly counterproductive and frustrating for innovators.

Benefits

Eliminates “dead-end” projects. It isn’t uncommon for some projects to get lost or stuck in big organizations. By requiring regular reviews, the Phase-Gate process ensures no project will be forgotten or left pending, hogging valuable resources.
Identifies issues early on. Every idea must pass several reviews. And if the idea is good but the planning around is poor, it simply gets paused and sent for a rework. This way the organization does not lose a good idea and gives it a standing chance.
Minimizes costs and time spent. By eliminating those “dead-end” projects and troubleshooting projects early, the organization is able to save resources. Also, the earlier you can identify, eliminate, and prevent issues, the cheaper it is, both in terms of time and money spent. That is usually preferable to pushing out a broken product into the market and then having to deal with the panic, complaints, returns, brand damage, and so on.
Prevents “politics”. By entailing the same rules, requirements, and stringent review process for each project, the Phase-Gate can prevent top executives from investing too much in their pet projects, freeing resource allocation and giving a fair chance for every project.
Facilitates joint decision-making. Instead of one project manager overseeing, managing, forecasting, and deciding upon the progress of the NPD process, in the Phase-Gate process, multiple stakeholders and teams can influence the decision-making process, making it more objective and inclusive.

In addition, it is important to note that a well-planned and well-structured Phase-Gate process counters some of the challenges that many fear experiencing while implementing it.

If done correctly, the Phase-Gate process can and will:

Foster holistic thinking. When done well, it helps to make sure everyone is thinking about the problems holistically: e.g., business, customer, and technology, which helps avoid unnecessary mistakes.
Systematize innovation. The structured approach gives clarity to the process, eliminates challenges, and bottlenecks, and gives a set of rules on how to make your idea into an innovative, valuable solution. While some might find this frustrating, it can also help turn more employees into successful innovators.
Reduce risk. Making a list, and checking it twice does help avoid unnecessary waste, mistakes, and any other mishaps. In addition, the Phase-Gate approach makes you detail all of your assumptions before you move forward with the project which allows solving all the potential issues before they have a chance to arise.

Tips to Improve the Phase-Gate Process

The Phase-Gate process is an adaptable and scalable approach that can help transform your business by identifying new opportunities and unlocking more innovation. And while on paper it all sounds pretty straightforward, in reality, it requires a dedicated management team to make it work for your organization’s unique business environment and culture.

To reach its full potential, consider some of the following:

Clear gate criteria. Set clear, objective criteria to pass each gate in advance, communicate it across all the involved teams and ensure they are accepted by each team before you move on. In addition, consider if you will want to proceed with a point-based rating system or whether another type of evaluation fits your processes better.
Clear gate function. While the primary goal of your gates is to stop/green-light a project, they should also work as a guide to the teams on what to do next. Make sure each gate makes the team outline and test the assumptions built into their plans and business models. Reviews should help guide teams on the right track, not just pass judgment. Finally, discuss and determine the types of meeting you will hold in-person, virtual, or hybrid. Which one caters to the needs of everyone and delivers the best results for your organization?
Diverse and educated gatekeepers. First, gather a diverse, multidisciplinary gate review committee that understands the customers and the technology intimately. Gatekeepers will after all determine the overall success of the Phase-Gate process. And second, as the gate review process touches on every possible aspect of product or service development, make sure your review committee is knowledgeable and constantly up to date on market changes, customer needs, legal or regulatory aspects, etc.
Regular check-ins. The timeline of your process will vary depending on the project you are developing, but either if it is moving at a fast or slow pace, regular (at least monthly) meetings are important to keep all projects moving. And this applies to meetings during each phase, not just during the review steps. It will allow teams to stay aligned and on top of resources.
Customer-first. Unless you are implementing changes aimed at improving employee engagement or other internal aspects, customers should always remain the focus of your attention. Staying customer-focused through every phase and gate will help you avoid internal politics, unnecessary competitiveness, and friction that might arise between project-developing and project-reviewing teams. And of course, it will ensure that you are still working on a relevant product or service.
Input from stakeholders. Retain open communication channels. First of all, it ensures transparency and trust top-down and bottom-up, by giving a clear view of the process to everyone involved. In addition, it improves the overall flow of the process and reviews steps by providing additional insights and feedback that otherwise might have been missed.

Lastly, consider your organization’s unique culture. It can take time and sometimes even resistance to introducing a completely new innovation management process.But patience, planning, clear communication, and internal support will set you on the right track to successfully implementing the Phase-Gate process.

Conclusion

Overall, the Phase-Gate process is a valuable tool for managing the development of new products and services, and it can help your organization to be more efficient, effective, and innovative.

For some, the Phase-Gate process might work great, while other organizations might need something a little different.

The Phase-Gate approach might have the biggest name in the group, but it is not the only innovation management process out there. If after reaching the end of the article you are still not sure whether it is the right fit for your organization, you can check our past entries on Innovation Management. Maybe it will help you discover just the thing you’ve been searching for.

But, if you are curious to proceed with the Phase-Gate process, you can try it on for size for example via the Viima app. To make your onboarding experience smooth, and your innovation project management easy, we have created a Phase-Gate process template ready to be used just after a few clicks.

This article was originally published on Viima’s blog.

Image Credit: Viima, Unsplash

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What Latest Research Reveals About Innovation Management Software

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What Latest Research Reveals About Innovation Management Software

GUEST POST from Jesse Nieminen

Our industry of innovation management software is quite an interesting one. It’s been around for a while, but it’s still not a mainstay that every organization would use, at least not in the same way as CRM and team communication software are.

Hence, there’s quite little independent research available out there to prove its efficacy, or even for determining which parts of it are the most valuable.

So, when I saw a new study, conducted jointly by a few German universities, come out on the topic, I was naturally curious to learn more.

In this article, I’ll share the key findings of the study with you, as well as some personal thoughts on the how and why behind these findings. We’ll also wrap up the discussion by considering how these findings relate to the wider trends within innovation management.

About the Study

Before we get to the results, let’s first briefly cover what the study was actually about and how it was conducted.

First, the focus of the study was to analyze the role of Innovation Management Software (IMS) adoption for New Product Development (NPD) effectiveness and efficiency, as well as the factors (software functionality and offered services) that actually led to successful adoption of said innovation management software.

The data was collected with an online questionnaire that was answered by innovation managers from 199 German firms of varying sizes, 45% of which used an Innovation Management Software, and 55% of which didn’t.

While this is the largest independent piece of research I’ve yet seen on innovation management software, we should remember that all research comes with certain limitations and caveats, and it’s important to understand and keep these in mind.

You can read the paper for a more detailed list, but in my opinion, this boils down to a few key things:

First, the study uses NPD performance as a proxy for innovation outcomes. This is an understandable choice to make the research practical, but in reality, innovation is much more than just NPD.
Second, while the sample size of companies is respectable, the demographic is quite homogenous as they are all German companies that employ an innovation manager, which obviously isn’t representative of every organization out there.
Third, the results are analyzed with regression analyses, which always brings up the age-old dilemma: correlation doesn’t imply causation. In other words, the study can tell us the “what”, not the “why” or “how”.
And finally, while the chosen variables are based on validated prior research, the questions still require subjective analysis from the respondent, which can introduce some bias to the results.

So, let’s keep these in mind and move on to the actual findings.

The Main Findings of the Study

The authors have done a great job in summarizing the hypothesis and respective results in a table, which you’ll also find reproduced below.

Innovation Management Software Research Results

Let’s break the results down by hypothesis and cover the main takeaways for each.

Innovation Management Software Adoption Leads to Better NPD Performance

The first hypothesis was that using an Innovation Management Software would lead to better New Product Development performance. This can further be broken down into two parts: efficiency and effectiveness.

The results show that IMS adoption does indeed improve NPD efficiency, but the impact on NPD effectiveness wasn’t significant.

Innovation Management Software improves New Product Development efficiency, but the impact on effectiveness isn’t significant.

Intuitively, this makes sense and is also well in line with our experience. Innovation, especially in terms of NPD, is hard and requires a lot of work and difficult decisions, usually in the face of significant uncertainty. No software can magically do that job for you, but a good tool can help keep track of the process and do some of the heavy lifting for you.

This naturally helps with efficiency which allows innovators to focus more of their efforts on things that will lead to better results, but those results still aren’t a given.

Functionality That Leads to Higher IMS Adoption

The second hypothesis is focused on the functionality provided by the innovation management software, and the impact of said functionality on overall IMS adoption.

To be more specific, the respondents were asked how important they considered each functionality to be for their firm.

Here, Idea Management was the only functionality that had an impact for these firms.

Idea Management was the only functionality that had a significant positive impact for the surveyed firms.

Again, that intuitively makes sense and is well in line with our experience. Idea management is the part that you embed in the organization’s daily processes and use across the organization to make ideation and innovation systematic. And as mentioned, it’s the part that does a lot of the heavy lifting, such as increasing transparency, communication and collecting and analyzing data, that would otherwise take up a lot of time from people running innovation, which naturally helps with efficiency.

So, while Strategy and Product Management capabilities do have their uses, they are not nearly as essential to IMS adoption, or innovation success for that matter.

In our experience, this primarily comes down to the fact that most companies can manage those capabilities just fine even without an IMS. The value-add provided by the software just isn’t nearly as high for most organizations there.

Services That Lead to Higher IMS Adoption

The third and final hypothesis focused on the importance of the services offered by IMS vendors for the respective firms.

Here the spectrum covered consulting, training, customer support, customizations, as well as software updates and upgrades.

Here, the only factor that made a positive difference for the respondents was software updated and upgrades. This category includes both minor improvements as well as new functionality for the software.

Interestingly enough, for consulting that relationship was negative. Or as the authors put it, adopters more alienate than appreciate such services.

Software updates and upgrades were the only service with a positive impact, whereas consulting actually had a negative one.

Let’s first cover the updates and upgrades as that is probably something everyone agrees on.

Good software obviously evolved quickly and as most companies have embraced the Software as a Service (SaaS) model, they’ve come to expect frequent bug fixes, usability and performance improvements, and even new features for free. Over the lifetime of the product, these make a huge difference.

Thus, most understand that you should choose a vendor that is committed and capable of delivering a frequent stream of updates and new capabilities.

Let’s then move on to consulting and discuss why it is detrimental to adoption.

While we’ve always kept professional services to a minimum at Viima, this still came as a bit of a surprise for me. As I’ve raised this point up in discussions with a couple of people in the industry, that do offer such services, they seem to respond with varying degrees of denial, dismissal, and perhaps even a hint of outrage. When such emotions are at play, it’s always a good time for an innovator to lean in and dig a bit deeper, so let’s do that!

Looking at this from the point of view of the customer, there are a few obvious problems:

Misaligned incentives
… which leads to focusing on the wrong issues
Lack of ownership

Each of these could be discussed in length, but let’s focus on covering the keys here.

First, it’s important to understand that every software company makes most of their profits from software licenses. Thus, while generally speaking modern SaaS models do incentivize the vendor to make you successful, that isn’t the whole picture. The focus is actually on keeping the customer using the software. With the right product, that will lead to good outcomes, but that isn’t necessarily always the case.

However, when you add consulting to the mix, it’s only natural that it focuses primarily on the usage of the software because that’s what they know best, and what’s also in their best interest.

And, while making the most out of the software is important, it’s usually not the biggest challenge organizations have with their innovation efforts. In our experience, these are usually in topics such as organizational structure, resource allocation, talent, culture, as well as leadership buy-in and understanding.

And, even if the vendor would focus more on some of these real challenges the customer has, they rarely are the best experts in these matters due to their experience coming from matters related to the product.

Advice on Innovation Management

Now, once you have a consultant come in, you of course want to listen to them. However, a consultant’s job is to give advice, it isn’t to get to the outcomes you want or need, and there’s a big difference there. That is one of the fundamental challenges in using consultants in general, and a big reason for why many don’t like to use them for long-term issues that are core to your future success, such as innovation.

Having said that, if you do use consultants, you can’t lose track of the fact you still need to take ownership for delivering those results. The consultant might be able to help you with that, or they might not. It’s still your job to make the decisions and execute on the chosen plan.

Put together, these reasons are also why we have been reluctant to do much consulting for our customers. We simply think the customer is best served by taking ownership of these matters themselves. We do, on the other hand, seek to provide them with the information, materials and advice they might need in navigating some of these decisions – with no additional cost through channels such as this blog and our online coaching program.

How do these findings relate to wider IMS trends?

Now that we’ve covered the key findings, let’s discuss how these are present in the wider trends within the Innovation Management Software industry.

In addition to what we hear in our discussions with customers and prospects, we’ve also discussed the topic quite extensively with industry analysts and would break these down into a few main trends.

Focus on enterprise-wide innovation

One of the big trends we see is that more and more companies are following in the footsteps of the giants like Tesla, Amazon, Apple and Google, and are moving innovation from separate silos to become more of a decentralized organization-wide effort.

This isn’t always necessary for pure NPD performance, which is what the study was focused on, but it is certainly key for scaling innovation in general, and one where efficient idea management can play a key role.

Once you embark on that journey, you’ll realize that your innovation team will initially be spread very thin. In that situation, it’s especially important to have easy-to-use tools that can empower people across the organization and improve efficiency.

Simultaneous need for ease of use and flexibility

That enterprise-wide innovation trend is also a big driver for the importance of intuitiveness, ease of use, and flexibility becoming more important.

In the past, you could have an innovation management software that is configured to match your stage-gate process for NPD. You might still need that, but it’s no longer enough. You probably want more agile processes for some of your innovation efforts, and more lightweight ones for some of the more incremental innovation many business units need to focus on.

If people across the organization don’t know how to use the software, or require extensive training to do so, you’ll face an uphill battle. What’s more, if you need to call the vendor whenever you need to make a change to the system, you’re in trouble. Top innovators often run dozens or even hundreds of different simultaneous innovation processes in different parts of the organization, so that quickly becomes very tedious and expensive.

Reducing operational complexity and costs

A big consideration for many is the operational complexity and running costs associated in running and managing their infrastructure and operations.

Extensive configuration work and on-premises installations significantly add to both of these, so even though they can be tempting for some organizations, the costs do pile up a lot over time, especially since it requires a lot more attention from your support functions like IT to manage.

What’s more, if you want to make changes or integrate these systems with new ones you may introduce, typically you only have one option: you need to turn to your IMS vendor.

As IMS tools have matured and off-the-shelf SaaS services have become much more capable, the compromises in increased rigidity, complexity and running costs, as well as less frequent updates are no longer worth it and off-the-shelf SaaS is now the way to go for almost everyone. With SaaS, you benefit immensely from economies of scale, and you are no longer held captive by the sunk cost fallacy of up-front license payments and extensive configuration and training work.

Commoditization in Idea Management

As the study pointed out, idea management is at the core of most innovation management software. However, in the last decade, the competition in the space has increased a lot.

There are now native SaaS platforms, like Viima, that are able to offer extremely competitive pricing due to efficient operations and a lean organizational structure. This has put a lot of pressure on many vendors to try to differentiate themselves and justify their higher price tags with additional professional services, as well as adjacent products and capabilities.

In our experience, while these might sound good on paper, they aren’t often leading to more value in real life, and the respondents of this study would seem to concur.

Conclusion

So, to conclude, what did we learn from the research?

In a nutshell, no innovation management software or vendor will miraculously turn you into a successful innovator. A good software, however, will help you become more efficient with your innovation efforts, as well as lead to softer benefits such as improvements in communication, knowledge transfer and culture. Put together, these can make your life a lot easier so that you can focus on actually driving results with innovation.

What then should you consider when choosing your innovation management vendor?

Well, the evidence shows that you should focus on idea management, as that’s where the biggest impact on the factors mentioned above come from. And therein, you should focus on vendors that continuously update and evolve their software with the help of modern technology and that has made all the above so easy and intuitive that they don’t need to sell you consulting.

And of course, ask them the tough questions. Ask to test the software in real life. If you can’t, that is a red flag in and of itself. See how flexible and easy-to-use their software really is. Does it require consulting or configuration by the vendor?

This article was originally published in Viima’s blog.

Image credits: Unsplash, Viima

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The Leader’s Guide to Making Innovation Happen

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The Leader’s Guide to Making Innovation Happen

GUEST POST from Jesse Nieminen

Many would-be innovators obsess over ideas, wait for inspiration to strike, and believe that with the right idea, success can miraculously come overnight.

However, as we’ve written before, that’s just not going to happen. In fact, usually the only thing separating the winning innovators from the rest is execution. It makes all the difference in the world, and yet, it’s still a vastly underrated capability.

As part of our coaching program, we’ve asked hundreds of corporate innovators and innovation leaders to reflect on their strengths and weaknesses. And, by far, the most common answer is that they’re great at coming up with ideas and thinking about the big picture but lack the patience and discipline to see things through to results.

As such, it’s safe to say that as a community, we innovators need to take a hard look in the mirror and admit that this an area where most of us have a lot of room for improvement.

So, in today’s article, we’ll explore the topic of executing innovation in more detail to try to understand what the problems associated with it are, and what successful execution of an innovation really takes. This is designed to be a guide to help leaders get it right, but I think there’s a lot that every innovator regardless of job title can learn from.

What does executing innovation mean?

Before we dive deeper, it’s probably a good idea to clarify what we mean with the term “executing innovation”, and how it relates to “implementing innovation”.

These are often used interchangeably, but I think it’s useful to distinguish them from one another. The way we like to put this is as follows:

Implementing innovation is the process of taking an idea and then turning that into reality.

Executing innovation, on the other hand, is the entire process of creating value with innovation.

In other words, implementation is what you do for an individual idea to make that happen. Execution covers the implementation, but also the process of turning that (along with many other ideas and innovations) into something that actually creates value and can be scaled up.

Implementation isn’t always easy, but it’s still typically a linear project that you can usually plan out in advance. Execution, on the other hand, is a much more complex and multidisciplinary effort.

To succeed at delivering value, you need to get a lot of things right. And with innovation, there are many assumptions in that plan. Some of those assumptions will always prove to be false, and you’ll need to deviate from the plan.

That combination of multidisciplinary collaboration and the need to deviate from original plans often leads to a myriad of practical challenges in many large organizations.

However, before we dive deeper into those challenges, let’s first take a step back to realize why execution is so critical.

Why execution is critical for innovation success

There’s a reason for innovation being defined as the act of introducing something new.

Everyone has ideas. Many can even implement some form of them, typically a prototype, but few successfully realize the full potential of the idea by truly executing on it successfully.

To clarify, ideas are an important starting point, but with every great idea, there are hundreds or even thousands of people across the world who’ve had the same exact idea.

Most never start working on it. Many give up in the process. Some make it to market, and a few might even make that into a feasible business. There are usually only a couple of winners. Those are the ones that succeeded in executing that idea.

Everyone has ideas, but few successfully realize the full potential of their ideas. The ones that do are the ones that know how to execute well.

This is of course a bit of an oversimplification but should help explain the fundamental importance of proper execution.

And that is not just true for individual ideas and innovations, but it’s also the case for corporate strategies at large. Look at any given industry, and it’s quite likely that you’ll see many companies with a nearly identical strategy. Again, the difference comes down to how well the company succeeded in executing that strategy.

In other words, your idea or strategy sets the ceiling for your impact if successful, but execution determines how close to that ceiling you’ll get. Even the best idea or strategy is worth nothing unless it’s executed well.

On the other hand, even with a mediocre strategy or idea, you can achieve remarkable success if you just execute it well enough. There are dozens of well-known companies like McDonald’s and FedEx that are obvious examples of this. There’s nothing particularly remarkable or distinctive about their ideas or strategies. They weren’t the first in their respective fields, they just executed on their ideas brilliantly.

FedEx Truck

What’s more, if you’re a strong executor, you’ll soon find out the limits of the original strategy or idea, at which point you can adapt and change course accordingly. But, it doesn’t work the other way around.

Thus, no matter the situation, execution will always be more important than your idea or strategy.

Misconceptions about executing innovation

As you might have realized by now, execution is of course a massive, nuanced, context-specific and very complex endeavor. In practice, it’s an endless jungle of interlinked choices and actions affecting one another that you need to navigate with limited information to get to the other side.

Thus, the space of possible challenges and problems you might encounter is pretty extensive. So, instead of looking at the individual problems themselves, it’s more helpful for us to try to understand the common misconceptions that ultimately lead to teams underappreciating execution and thus subsequently failing at it.

A big factor behind most of these is the fundamental uncertainty that innovation is always associated with. Because you can’t know everything in advance, it’s not going to be a nice and linear process of doing simple steps one after another. Instead, it’s a messy and iterative process of creative problem-solving.

Anyway, with that, here are the top four that I most commonly see innovation leaders and their teams have.

1. The leader’s job is just to get the big picture right

This is probably the most common problem I’ve come across, and it’s especially common among inexperienced executives, or ones that otherwise lack execution experience, such as some management consultants and academics.

There are many shapes this one might take, and we’ll return to it later, but what it ultimately comes down to is the glorification of strategy work and/or surface-level creativity.

In business school, and in consulting, we’re taught to think about the big picture as the job of top management. We’re led to believe that a leader or innovator takes in a market analysis, compares a few scenarios, chooses a positioning, and then paints an inspiring vision to show direction for the company. Then the pieces will simply fall in place and success happens.

Innovation Leader

While the above mentioned are of course still useful activities, if you’ve ever actually turned an innovative idea into a successful business, you know that in practice, there’s a lot more to it than that, and experienced executives are of course well aware of that

Strategic choices can be made across the organization, but the responsibility for execution always lies at the top.

As Professor Martin has well put it, CEOs should stop thinking that execution is somebody else’s job, and the same applies for every innovation leader. Strategic choices can be, and frequently are, made where the action is. Yet, the responsibility for execution always lies at the top. After all, there’s a reason for the CEO being the Chief Executive Officer.

2. I don’t need to understand the details

The second is closely related to our first one. It’s easy to think that as a leader or visionary innovator, you’re the person responsible for the vision, ideas, and big picture decisions, and then the experts will then figure things out in practice. After all, that’s why you hired them, right?

Well, that might work if you’re operating in a static industry where all the variables are known and static, but with innovation that really isn’t the case.

You need to get the big picture right, but it isn’t enough to succeed. You need to also have the right product, business model, technology, customer experience, customer acquisition channels and tactics, operating models, etc. All of these have a wide variety of choices that depend on one another and changes in any of the areas will force you to change many of the other pieces in the puzzle too.

With innovation, the devil is in the details!

As an innovation leader, connecting the dots is ultimately your job, and you can’t do that without understanding the details.

That’s why you’ll find an obsession for the details in pretty much every successful innovator, both past and present. They have the same in-depth understanding and attention to detail as the best artists, athletes and top representatives of other fields do too.

So, while you absolutely need to engage with and empower the experts, they are experts in their own field and likely don’t know how to consider all the other moving pieces in the puzzle. As an innovation leader, connecting the dots is ultimately your job, and you can’t do that without understanding the details.

It’s the one responsibility you simply can’t delegate away.

3. Execution requires a clear and unambiguous plan

Even if you are an experienced executive and value the importance of execution highly, it doesn’t mean you couldn’t fail when executing innovation. Here the most common problems occur if the leader’s experience comes primarily from operations within the known and well understood confines of “business as usual”.

When the environment is well understood, and the scale large from the get-go, it’s of course valuable to try to plan carefully, analyze business cases and craft detailed project plans prior to execution.

Also, since everyone knows that innovation is a risky endeavor, it of course makes sense to try to reduce those risks before your start a big innovation project to try to avoid major mistakes and generally just ensure that you’ve done a good job in planning and preparation before committing to the project.

This often leads to large companies commissioning all kinds of market studies and strategy projects. Some of those can certainly be useful in increasing your understanding of the landscape, but most invest way too much time, energy, and money into these. Also, every now and then these projects seem to be ordered only to have a scapegoat in case something goes wrong.

Regardless, there’s a fundamental problem: with innovation, you can’t have all the answers in advance. You’ll always need to make a number of assumptions upon which your plan relies on, some of which will inevitably prove to be wrong.

With innovation, you won’t have all the answers in advance.

Thus, if you require innovators to propose clear, detailed and unambiguous plans for you, or conversely create such plans and then hold innovators accountable for successfully executing them, it just won’t work out. And, whenever it then comes to surface that everything hasn’t gone according to the plan, innovation projects are frequently shut down, even if they’d still hold a lot of potential.

You obviously still need to align with the strategy, plan ahead, and have a disciplined approach to execution, but it’s not so much about creating a detailed roadmap, as it is about choosing direction and figuring out which questions or problems you’ll need to address first.

In other words, you need to embrace the uncertainty and the fact that you can’t have a perfectly unambiguous and detailed plan before starting to execute it. Instead, figure out what the assumptions and uncertainties in your plan are and commit to a disciplined learning effort to figure out the right path forward.

4. Innovation is fun

There’s a stereotype around people working in innovation being these visionaries that are bursting with great ideas and seem to come up with great new concepts all the time. And as mentioned in the intro to this article, that is often true.

The Fun Part of Innovation

That skillset is of course very useful for innovation, but there’s also a downside. There are naturally exceptions, but many of us working on innovation can find execution too boring and repetitive, and/or lack the perseverance, discipline, and patience needed to succeed at it.

Innovators often spend too much on the creative and “fun parts” of innovation, as opposed to what’s really needed to turn an idea into a successful innovation

As a group, we generally love creative work, and are always looking for fresh, new stimuli to feed that inspiration. That often leads us to spend too much time and effort on the “fun parts” of innovation, and too little on the not so fun, more repetitive, and laborious parts of the process that execution essentially is comprised of. The reality is that for every minute you spend coming up with ideas, you’ll probably need to spend a day, a week, or even more implementing those ideas.

So, if your innovation team is primarily filled with, or led by, such “idea people”, which is quite common, then there’s a big risk of a systematic lack of respect for and capabilities in execution. This will lead to a very suboptimal culture for innovation, and ultimately disappointing business outcomes.

Getting Execution Right

As already mentioned, there are a lot of similarities between successful execution in “business as usual”, and in innovation. However, there are also clear differences between the two.

So, to help you navigate the differences, and to succeed at executing on whatever innovation you’re working on, here are the five most important factors to keep in mind whenever you’re trying to execute on an innovation and build something truly novel.

Getting Innovation Execution Right Viima

1. Take the path most likely to succeed, but keep your options open

As mentioned, with innovation planning and strategy work need to be done a bit differently than you would with an existing business.

Good decisions here make it much easier for your team to figure out how to move forward and can save a lot of time money going down the wrong path. Regardless, you’ll soon end up at another crossroads and need to make another decision. Heck, sometimes you might even come across a dead-end and need to backtrack to an earlier crossroads. Sometimes Plan C or D is the way to go.

Innovation Plan C or D

The point is that no matter which path you choose, you won’t see what’s ahead all the way to the end.

Thus, good strategy work requires you to embrace uncertainty, test assumptions critically, and think deeply about the real-life feasibility of each path ahead.

And it’s certainly not a one-time project you do at the beginning, but more of a continuous learning process as you unravel the puzzle piece by piece.

If you keep an open mind and build your teams and products to embrace that uncertainty, you can quickly recover and learn from setbacks, as well as embrace new opportunities you couldn’t even think of before you set out. This is what’s known as cognitive and organizational flexibility.

2. Solve the biggest problems first

As humans, most of us have a bit of a tendency to go for the comfortable low-hanging fruits and procrastinate on the hard but important problems, as well as uncomfortable truths.

I’ve certainly been guilty of this on many occasions, even while writing of this article. Getting a number of small things done makes us feel like we’re making good progress, but unfortunately that’s often a bit of a false sensation as we might not really be any better off than when we began.

With the inherit uncertainty in innovation, that is naturally a bit of a problem. When you’re executing any given innovation, there’s countless things that need to be done so it’s easy to just start checking off boxes like building more features, creating marketing materials, getting compliance approvals, or whatever you may have on your agenda.

But, it’s the big things that make or break your innovation early on. For example: will a customer benefit from my product, how much are they willing to pay, can I even build the product I’ve envisioned, etc.

While you need to care about the details, it’s the big things that make or break your innovation early on. So, start from the big problems, even if it hurts!

The key is finding a way to figure out what these big problems or critical assumptions are, and then find ways to quickly test and address them. This allows you to quickly figure out if you’re on to something, which of course saves a lot of time and money for you in the inevitable case that you weren’t quite there from the get-go.

Also, if you get the big things right, you can already deliver most of the value, and that means you can more quickly start capturing some of that value to get a return for your investments.

Plus, if you tackle these early on when you still have a small team, changing course will be much quicker and easier, and you’ll have spent much less money solving the same important problems than you would with a larger team later on.

In most businesses, these critical assumptions revolve around how much value you can deliver to customers, and how valuable they see that to be. However, in certain circumstances, those can be related to something entirely different, such as the feasibility of implementation when developing a new breakthrough drug.

Solving for the hardest problems first does generally require a bit more of a leadership commitment as you won’t always be able to show quick wins as early on, but at least it can save you from an embarrassing and costly failure like CNN+.

3. Build the right team

It might be a bit of an obvious statement, but it’s still probably worth pointing out: innovation is a bit of a team sport. So, to do well at it, you need the right team.

However, what might not be as obvious is that ‘the right team’ means in practice. In our experience, there are two key parts to this:

Multidisciplinary team with talented individuals in each area
Leadership and individuals that share the right mindset for innovation

The prior is pretty self-explanatory. Innovation is almost always a cross-disciplinary effort. The specifics depend on what kind of an innovation you’re working on, but usually you need expertise in at least design, engineering, commercial and operational matters.

The most impactful innovations are actually comprised of a stack of innovations in many of these areas, each designed to work together to address a specific problem or ‘job’ for the customer. Thus, if you have talent at every position, the outcome will be much more than the sum of its parts.

Talented, disciplined, and gritty, multidisciplinary teams are needed for innovation

The latter, however, is the part that many teams fail to appreciate. Innovation is, by definition, doing something that others haven’t succeeded at before, so the journey won’t be easy.

Your team will face a lot of uncertainty and struggles, and will still need to perform at their best, often under a lot of pressure. That requires a very specific type of culture within the team, but also the right mindset for each individual. You want people that can cope with uncertainty and are able to remain optimistic and overcome difficult situations while still being realistic and ruthlessly critical of their own capabilities. They need to have an innate passion to strive for excellence, and a lot of discipline, grit, and perseverance.

And, of course, because it’s a team sport, people need to be able to work well together and perform as a team. This, however, isn’t usually much of an issue as long as people can leave their egos at the door. The struggles you will face together as a team will build bonds and gel you into a team.

4. Make sure every decision and detail are aligned

As we already discussed, you don’t need (and usually can’t have) a clear and unambiguous plan for an innovation project where every role and task would be charted out in advance. However, as we also discussed, the devil is often in the details and seemingly small things can derail the project from its goals?

So, what gives?

Well, the point is that with innovation, you need to keep an eye on everything. As an innovation leader, you need to maintain excellent awareness of both the big picture and the details throughout the project. But, because the environment changes dynamically and you need to move fast, you can’t really do that work upfront.

Nor can you just look at some KPIs and financial reports to figure out if things are moving in the right direction because the important things won’t show up in these for quite a while, and at that point, it’s often too already too late to react.

Everything must align when executing innovation

As a leader, your primary job is to keep up with what’s going on both with the ever-changing big picture, and the details on the ground so that you can spot problems early and intervene before it’s too late, no matter where the issues might arise from. If you don’t understand how everything works in practice and know what problems everyone is working on and why, it will be pretty much impossible to do that.

Some might see the latter as micro-management, but it doesn’t mean you have to dictate what everyone does. It just means that as a leader, you need to be the person that connects the dots and then empowers the team to succeed. There’s a clear difference.

Which brings us nicely to our last point.

5. Take full ownership for the execution

As we’ve covered, execution is the make-or-break part in the lifecycle for every innovation.

It’s always a bit of an exploratory process where you need to remain flexible, while still moving forward quickly and executing at a high level.

And, at the same time, seemingly inconsequential low-level choices related to implementation turn out to become existential issues for any innovation project.

Again, you don’t need to decide everything on behalf of your team. In fact, often it’s best to let the experts solve problems and do their job, as long as you can give them the right guidance and constraints to work with. Instead, you need to think of every potential problem as your fault and then figure out a way to get past them together with your team.

The bottom line is that being an innovation leader isn’t easy. It takes a lot of time and work to understand and stay on top of things, but as already mentioned, that’s the one thing you can’t really skip, automate, or delegate. Essentially everything else you can.

The only way to succeed at that is to take full ownership and commit to the process.

Conclusion

We’ve covered a lot of ground, so let’s do a bit of a recap.

Innovation isn’t a linear project that you can plan out in advance and monitor progress with a Gantt chart. There will always be plenty of surprises. Many unpleasant, but usually some positive ones too. You’ll need to be flexible enough to react to these and alter course accordingly.

It’s an inherently messy and iterative process of figuring out a way to build new things and align all the pieces so that everything works out.

Fundamentally, an innovation leader’s job is to show direction and try to keep track of everything that’s happening, align those puzzle pieces together with the big picture while always being on the lookout for potential problems and then eliminate those before they derail the project, as there will be many.

It’s not an easy or comfortable job, but if you can get it right, it’s an incredibly rewarding one.

Ironically, despite all the talk about practical issues and attention to detail being vital, this has been a bit of a high-level overview on the topic. So, if you’re interested in learning more about the details related to what we’ve discussed today, I have a couple of practical recommendations for you:

First, the best way to learn to innovate is by doing. So, get your hands dirty, keep these tips in mind, do your best, and I’ll guarantee you’ll learn a lot.

But, if you currently don’t quite have the time to commit to an innovation project, a good alternative way to learn more about innovation management is with our Innovation System online coaching program. We’ve now made the program completely free of charge for the first 1000 readers to sign up for it.

This article was originally published in Viima’s blog.

Image credits: Unsplash, Viima

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A Guide to Organizing Innovation

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A Guide to Organizing Innovation

GUEST POST from Jesse Nieminen

I recently read a couple of excellent articles by Nick Skillicorn, and Prof. Rita McGrath where both discuss the challenges and intricacies involved in structuring and governing innovation within a large organization.

This is a classic topic that every corporate innovator has without a doubt come across, and it’s also one where “the right approach” is often quite elusive.

Inspired by those articles, we’ll present the most common archetypes and then dig a little deeper on the topic and share our thoughts and experiences to help you figure out how innovation should be structured within your organization.

Why organizing innovation is challenging

Before we dive into the different models for governing and organizing innovation, it’s important to understand why this is such a challenging topic to begin with.

That’s of course quite a lengthy and nuanced topic, but in short, there is no such thing as a perfect organizational structure or governance model. The bottom line is that a large organization is simply such a complex entity that structuring everything perfectly so that there aren’t any kind of bottlenecks, misaligned incentives, or any duplication of work just isn’t very realistic. If you’ve ever worked in large organization, you’ve certainly come across some of these challenges.

Now, most of these challenges are likely to be worse with innovation than with “business as usual” as, by definition, innovation means introducing changes. And most organizations simply aren’t designed for constant change.

What’s more, businesses are naturally very different from one another. A structure that works for a single product software company probably isn’t ideal for a CPG manufacturer or a house of brands because not only are their industries different, so are the innovations they are going after. So, what works well for some organization probably won’t be ideal for you.

This means that benchmarking and then applying “best practices” likely won’t work too well. Unfortunately, there just isn’t a single correct way to organize innovation.

Exploring the organizational archetypes for innovation

Having said that, there are a handful of common approaches, which we like to call archetypes, that most organizations use as the foundation for their efforts to organize and govern innovation.

Both McGrath and Skillicorn have done an excellent job in presenting many of these approaches, so a lot of credit for the following descriptions goes to them and I’d warmly recommend you read their takes too. Regardless, we’ve summarized their main points and combined them with our own experiences to create the following archetypes.

We’ll next explain each of these briefly, along with a quick summary of the key strengths and weaknesses for each.

External Innovation Organizational Model

No in-house innovation

The first and simplest way to organize innovation is to not do it, or to completely outsource it. Perhaps the most common method here is to simply keep tabs on promising startups and then acquire them, or to have tight collaboration with universities and other research institutions.

While this obviously keeps things simple organization-wise and minimizes fixed costs, it also means that you no longer have control over your own destiny, and are instead reliant on third parties, which puts you in a very vulnerable position long term. Furthermore, in the last decade, we’ve seen a huge inflow of capital to fund startups, which means that valuations for promising startups have skyrocketed and acquiring them on the cheap is simply no longer a very feasible strategy.

Suffice to say, if you want to build an organization that thrives in the long run, I wouldn’t recommend this approach.

Pros

Low fixed costs
Structurally simple

Cons

Lack of strategic control and ability to build the future of the organization
Lack of differentiation
Reliance on third parties for both execution and especially exploration
Acquisition of promising innovations has become expensive

Centralized Innovation Organizational Model

Centralized

Perhaps the most common way large organizations set up innovation is by creating a centralized department that serves the innovation needs of the entire organization including each business unit and support functions, such as IT or HR. This can be a subdivision within R&D, but these days it’s typically a separate cross-departmental unit serving the innovation needs of business units.

Either way, such a unit is quick and easy to set up, and the approach has some other obvious advantages too, such as innovation expertise being built and managed centrally, which speeds up learning, as well as management and reporting being easy to organize.

It’s these advantages that make centralization the obvious choice for many who are just starting out with innovation. This is also an especially common approach for large industrial companies that typically have a strong R&D tradition.

If all of the innovation has to go through a single team, that team will inevitably become a bottleneck for innovation, no matter how skilled or large it is.

However, in the long run, this approach is also one that is likely to significantly limit your innovation potential. The reason is simple: if all of the innovation has to go through a single team, that team will inevitably become a bottleneck for innovation. No matter how large or skilled the team, they’ll never have enough resources. What’s more, this will also disincentivize everyone else in the organization from innovating and that prevents you from creating a true culture of innovation.

Pros

Quick, easy, and cheap to set up
Dedicated resources for working on innovation
Easy to govern, manage, and report on the overall innovation portfolio
Centralization can speed up learning

Cons

Poor scalability as centralized team will inevitably become a bottleneck for innovation
Likely to be pulled into too many projects, which leads to poor execution
High risk of degenerating into a support function serving business unit requests instead of strategically building the future of the organization
Likely to disincentivize others in the organization from innovating
Conflicting interests between business units can make prioritization difficult
Typically lack authority to make important, hard decisions

Dedicated Innovation Organizational Model

Dedicated

Popularized by Clayton Christensen as a solution to the Innovators’s Dilemma, dedicated business units for innovation have become increasingly popular in large organizations that are looking for the next stage of their growth. Sometimes these units have proper P&L responsibility, and they might even report directly to the CEO or others in senior management, but at times they can also be innovation labs responsible primarily for testing and piloting new ideas before they are to be integrated into the core business.

Regardless of the particularities, these approaches have some specific strengths, but also clear weaknesses. The good thing is that because the unit is independent, it can usually avoid being held back by the restrictions of the business as usual and can build their talent and approaches from scratch.

If innovation is the job of a select few, it will be incredibly hard to build a pro-innovation culture.

The downside is that they also don’t necessarily play to the strengths that the organization has already built. Without strong and clear leadership, these kinds of innovation efforts are likely to have an equally poor success rate as your average startup – but without the asymmetric upside.

The reason is simple: if you already have hundreds of millions or billions in revenue, most new businesses just don’t move the needle enough – unless they can quickly grow to a massive size or be combined with the strengths and competitive advantages of the core business.

And just like with the centralized model, this model again limits innovation to one part of the organization. As before, that will likely prevent you from creating a true culture of innovation, and thus lead to the unit becoming a bottleneck down the road.

Pros

Freedom to operate independently from processes of existing business units, which is essential for trying new things and creating disruptive innovations
Ability to hire and organize specifically for innovation
If led well, ability to focus on the long-term instead of short-term performance
High profile innovation unit can also be used for marketing and employer branding purposes

Cons

Conflicts of interest and lack of cooperation between core business and innovation unit likely to lead to politics, tension, and other challenges in integrating innovations into core business
Independence and lack of communication between business units might hurt strategic alignment and prevent the innovation unit from benefiting from the existing strengths of the organization
Can easily degenerate into a cost center performing innovation theaterwithout a clear strategic focus, strong leadership, and evidence-based processes
Likely to disincentivize innovation in other parts of the organization and thus prevent the creation of an innovation culture
High initial investment with lots of uncertainty can make the business case for investing in innovation look bad

Embedded Innovation Organizational Model

Embedded

Many organizations have relatively independent business units or product and brand teams, and for them it can often make sense for innovation to be embedded within these units.

Traditional examples of such an approach are companies like P&G and other CPG companies with strong brands. These companies are working hard to keep up to date with evolving trends and consumer needs to innovate and create new products for the consumer. However, the same can also be true for many other kinds of businesses, such as software companies with multiple products.

Depending on the industry and organization, these units might have varying levels of control over their innovations once they are on the market. For example, in CPG companies manufacturing, logistics and many other functions would likely be managed by core business operations instead of this unit.

Pros

Better able to focus innovation on things that matter for each business, be they strategic projects or emerging customer needs
More control over innovation resources and ability to get talent that meets specific needs
Parallelization over different units can increase innovation throughput of the organization overall
Easier to align innovation with business needs and plans within the unit
The business case for investing in innovation is typically easy to make as you can start from low-hanging fruits that provide immediate value

Cons

Innovation likely to be biased towards more applied and incremental projects due to focus on immediate business needs
Some efforts may be duplicated between teams, especially if more long-term R&D work is being done
Can lead to a silo-effect, extra need to focus on facilitating knowledge transfer between units

Ambidextrous Innovation Organizational Model

Ambidextrous

Our fifth approach is usually referred to as the ambidextrous organization. We’ve also seen it be referred to as the Hybrid model, and it’s quite a natural evolution from the previous archetypes as it seeks to combine the best of both worlds.

In a nutshell, the idea is that innovation should happen across the organization with existing business units focused on exploiting their current position through incremental innovation, and a separate dedicated unit being responsible for exploring and building the future of the organization through more radical or disruptive innovation.

In the ambidextrous model, existing units use incremental innovation to exploit the current position and new units are set up to explore and build future.

In practice, a new P&L responsible division will be setup for new non-core businesses, and the more incremental innovation will then be organised either as Embedded or Centralized.

If an organization does successfully implement such an approach, it can lead to exceptional long-term performance, but that’s of course easier said than done. For most organizations, this is likely to require a significant transformation, and it can be challenging to get everyone onboard, build the right processes, as well as to align goals and incentives the right way across the organization.

Pros

Easier to build a balanced innovation portfolio with both strong short and long-term performance
Enables building an innovation-oriented culture across the organization
Enough resources for key projects across the organization
Makes it easier to communicate the innovation strategy with clear roles and responsibilities for each part of the organization
Can customize governance models to meet the needs of different types of innovation in different parts of the organization

Cons

Expensive and difficult to build, as well as to maintain
Requires clear leadership and a commitment to a transformation from the top
Can demotivate innovation-oriented employees that are in the core business
Usually requires extensive changes to processes and the re-skilling of managers and employees across the organization
While easier than with most other models on paper, prioritization and division of responsibilities can still be challenging in practice

Decentralized Innovation Organization

Decentralized

Our final model is the decentralized approach. If you look at any of the best innovators in the world, be it Apple, Tesla, SpaceX, or Amazon, this is closest to the model they use. None of these organizations has a centralized or dedicated team responsible for all innovation in the organization.

Instead, the organization decentralizes the responsibility for innovation to happen in individual teams (which are typically cross-functional and relatively small) across the organization. Each team is focused on figuring out how they could help the organization better reach their strategic goals, and innovation is just one of the key tools in that process.

If a team (or an individual leader or employee) comes across a big idea that shows promise but would require significant additional investments, they’ll apply for additional resources from management via a quick and streamlined process. If approved, that typically leads to another team being set up to pursue that idea.

This approach is sometimes called the permissionless model due to the significant freedom each team possesses to make decisions affecting their own work. The obvious advantages are that they usually know the problems intimately and have the resources, incentive, and know-how to solve them, and have fewer dependencies to other parts of the organization. That leads to an extremely high pace of innovation and innovation throughput for the organization, which together create a tremendous competitive advantage.

Loosely Coupled vs Tightly Coupled Organization

Having said that, this too isn’t exactly an easy model to implement for most organizations. Typically, this would require a fundamentally different mindset, leadership philosophy, and a significantly higher talent density. For the average organization, that means a full-blown transformation where most fundamentals in the organization would need to change, which of course isn’t feasible for many.

Pros

Extremely high throughput and pace of innovation
Ability to adapt, re-organize and meet changing demands quickly
Strong focus on execution and value creation
Clear roles and responsibilities

Cons

Would require a fundamental transformation for most organizations
Requires strong communication and strategic clarity from management
Active management involvement required to remove barriers and to organize teams so that the portfolio remains balanced
Requires high talent density across the organization, which can be very challenging to achieve in practice
Continuously evolving and rapidly changing landscape might be too intensive for some employees
Some work often initially duplicated across teams, but can be managed by creating horizontal support teams

Choosing the right approach for your organization

As you can see, every approach has their benefits, but also their disadvantages.

In our experience, the Hybrid and especially Decentralized are the likeliest approaches to lead to sustained levels of high innovation performance in the 21^stcentury but implementing either isn’t exactly a walk in the park for a large organization. If you have the luxury of meeting (or are close to meeting) the prerequisites, these are the models I’d personally go for.

However, for many, that just isn’t the reality. Even if you’re like most organizations and don’t quite have the talent, leadership, or other prerequisites needed for these approaches, I’d keep either the Hybrid or Decentralized approach as your eventual goal to build towards.

Move control and decision-making down in the organization to be able to move faster, make more informed decisions, respond to changes quicker, and to simply innovate more.

However, instead of a major overnight transformation, you should be prepared for a set of smaller, gradual steps that build your capabilities and culture towards that future while solving the current problems with your processes and structures.

Centralization vs Innovation Maturity

While not ideal in theory, in practice the journey towards becoming a mature top innovator typically first leads towards centralization for most incumbent organizations. They need to build their innovation strategy, knowledge and capabilities before they can successfully decentralize and move control and decision-making down in the organization to be able to move faster, make more informed decisions, respond to changes quicker, and to simply innovate more.

With that background, if such an approach is used, it’s crucial that this centralized innovation function understands and embraces their temporary role so that they are willing to relinquish control and power over innovation to others. All too often we see these leaders clinging on to the team, budget and power they’ve built long after it would’ve been in the organizations’ best interest to re-organize.

Best practices for organizing innovation

As we’ve discussed, if you’re planning to make changes to the way you organize innovation, most decisions will depend on your context. Still, there are a few things that are good to keep in mind regardless of the approach you end up choosing. Here’s my top three:

The best innovators continuously evolve

The first, and perhaps the most important point to remember is that the best innovators continuously evolve and improve the way they work. They don’t just pick one organizational structure and go with that forever. Instead, they are constantly looking for ways to re-organize their efforts so that they work on whatever is likely to best help them reach their goals. This is of course one of the fundamental strengths of the Decentralized model but applies to other approaches too.

This is also in line with how the most successful organizations approach re-organizations in general. They don’t just wait until the old structure is burning, they act proactively to position themselves for the future they want to create.

Clear roles and decision-making structures

It’s pretty obvious, but if people don’t know who can make a decision on an idea that they may have, or even who’s responsibility it would fall under, odds are that not a lot of innovation will happen.

The reality is that there will always be some ambiguity and overlap, especially in fast moving environments, but clear roles and decision-making structures are regardless important for an organization that wants to innovate.

If projects or decisions seem to get stuck, or turf battles seem to consistently pop up in your organization, unclear roles and ambiguous decision-making are likely to be the main culprits.

Organize according to strategy and plan for the execution

Again, it might sound obvious, but especially with innovation, the differences can be dramatic. Organization is the link between your strategy and your execution, so make sure it isn’t detached from the realities of what it will take to reach your goals with innovation.

To use a bit of a simplified example, if your strategy is focused on creating new business from emerging disruptive technologies, then the Embedded model probably won’t cut it as your innovators will be kept busy by the priorities from the core business.

How to organize innovation

Plan for the execution, on the other hand means that each team should have the resources and the freedom needed to reach your goals. If, using our previous example, you allocate just a few engineers to the team and then hope that sales will magically turn those technologies into booming businesses, odds are very much against you.

In other words, try to allocate resources so that the team has everything they need to reach their goals. While this sounds super basic, we still see these mistakes frequently when innovation is a bit of an afterthought for management.

Conclusion

As is probably evident by now, no structure or approach to governing innovation is ever going to be perfect, at least for long. As your goals change or your business and industry keep evolving, you will need to change and evolve too.

Even though organizing innovation doesn’t seem to get the same kind of attention as innovation strategy or culture, it’s extremely important, nevertheless. Get it wrong, and it will be almost impossible for your organization to succeed at innovation. Get it right, and you’ll at the very least have a realistic shot at that.

Hopefully this article has provided you with more thoughts on the topic, and some views on what to do and not-to-do.

This article was originally published in Viima’s blog.

Image credits: Unsplash, Viima, Nick Skillicorn

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