Tag Archives: Innovation Management

Agile Innovation Management (Part Two)

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:

  1. Purpose-Driven Mindset: Shift from a focus on capturing value to co-creating value with stakeholders, embodying a shared vision across the organization.
  2. Empowered Network of Teams: Transition from top-down direction to self-organizing teams with clear responsibility and authority, fostering engagement, innovative thinking, and collaboration.
  3. Rapid Learning Cycles: Embrace uncertainty and continuous improvement through iterative decision-making and experimentation, prioritizing quick adaptation over rigid planning.
  4. Innovation Culture: Cultivate ownership, empowerment, and customer-centricity, enabling employees to drive organizational success.
  5. 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

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.  
  1. Individuals and interactions over processes and tools
  2. Working software over comprehensive documentation
  3. Customer collaboration over contract negotiation
  4. 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.  

source: unsplash.com

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?

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.

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.

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

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 challengesbrainstorming 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.

Source: Unsplash.com

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.

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

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-20th 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:

  1. Discovery phase: an innovation opportunity is discovered, and the initial idea is screened for the first time.
  2. 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.
  3. Feasibility: accepted idea moves to the feasibility phase, where a business case is built, and the concept gets screened at the third gate.
  4. Development and Validation: the innovation’s first prototypes are created and evaluated, and testing takes place.
  5. 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 whatwherewhen, 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 (BetaTesting: 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 ScreeningSecond Screening, Go-to- DevelopmentGo-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 riskMaking 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

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

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

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 21stcentury 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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Discipline Has a Role in Innovation

Discipline Has a Role in Innovation

GUEST POST from Jesse Nieminen

Innovation is, without a doubt, a creative endeavor. However, many people still think it’s all about creativity. There’s a magical a-ha moment, and the rest is history.

Well, as we’ve explained before, that’s just not true. Those that have really been trying to innovate know that there is much more hard work than there is fun and games in the process of creating and scaling an innovation.

Thus, discipline plays a huge role in innovation. In fact, I’d argue that discipline is one of the least spoken about, yet most important factors determining whether individuals and organizations succeed at creating innovations.

So, in this article, we’ll dive deeper into the topic and discuss the role discipline plays in innovation to hopefully help you and your organization do a better job at it.

What is discipline?

As a term, discipline is commonly used to just refer to being strong-willed enough to put in a lot of hard work. In other words, self-discipline.

However, if we look at a dictionary, there are a few distinct but connected uses for the word. One refers to it as a branch of science, skill or type of work, another as the practice of regulating the behavior of people in a system, and the third as a synonym for punishing people for undesirable behavior in that system.

Well, innovation is certainly a discipline in the first meaning of the word, but it’s also one that takes a lot of discipline to succeed at, in the second meaning of the word.

“Innovation is a discipline that takes a lot of discipline to succeed at.”

Let’s dive a bit deeper on that second meaning for the word. For our purposes, we can further divide that it into two categories:

  • Self-discipline
  • Organizational discipline

There’s obviously a lot these have in common, but for an organization to succeed at innovation, you need both.

In a nutshell, you need self-disciplined individual willing to put their head down and persist. But you also need organizational discipline to focus on what matters, and to create the incentive structures needed to reinforce all of that.

Why is discipline so important for innovation?

So, with that covered, we can dive deeper into why discipline is so important for innovation and how that happens in practice.

We’ll next cover each of the main points briefly.

Viima Art of Discipline

It takes hard work, persistence, and focus to create an innovation

Because our software is centerer around ideas, we often have to explain that while every innovation starts from an idea, an idea is maybe 1% of the way there towards a real innovation. It still needs development, refinement, implementation, scaling, and so on.

Going through that whole process takes a lot of hard work for pretty much every idea, even if the idea might seem trivial at first. The fact is that by the time you get an idea, hundreds, thousands or maybe even millions of people have probably had the same idea before. Most have just never bothered to implement it, or at least haven’t succeeded at it.

“Every innovator will face plenty of challenges on the way, and there will be plenty of times when things look dire, and you could give up.”

Every innovator will face plenty of challenges on the way, and there will be plenty of times when things look dire, and you could give up. Most do. But to succeed, you need to persevere and persist through these hardships.

To do that, you’re going to need a lot of discipline to avoid potential distractions, keep your head down and focus on what matter.

Trust the process and keep going

If you’ve ever been following a challenging fitness program, you know the feeling when it looks like you’re working your butt off and not making any progress.

The weights feel even heavier than they did the last time. That’s because you’ve been accumulating stress on your body, and it hasn’t yet had the opportunity to respond. Once you get some rest and recover from that stress caused by the exercise, the body will react to the stress and make you stronger.

Innovation takes hard work and trust in the process

Well, the journey is the same with innovation: facing those stressors will feel challenging, but if you don’t give up, that’s what will make both you and the innovation better.

To keep using the same metaphor, if you’d like to run a 3-hour marathon, your fitness program will obviously look very different from if you instead wanted to squat 500 pounds. Similarly, if your strategy calls for incremental innovation, your innovation processes will look very different from those aiming for disruptive innovation, but more on that here.

Regardless, the key in each of these situations is to just trust the process and keep going. Even when things don’t look great. The challenges you face will shape your innovation for the better, and the results will follow – or you’ll run out of money. Regardless, you just need the discipline to persist and stay on track.

While following the process is what will eventually get you there, you of course need to make sure you’re on the right path in the first place, and that is where disciplined thinking comes into play. 

It’s easy to fool yourself without disciplined thinking

Our brain has a natural tendency to take mental shortcuts. We have an ability to recognize patterns and use those to make quick decisions efficiently and thus save energy. In most everyday situations, that ability is obviously very beneficial.

However, with innovation, this is often problematic. It’s these mental shortcuts that lead to many of the root causes behind issues that prevent organizations from innovating. This is perhaps easiest captured in common sayings like “This is how we’ve always done it” and “There’s no way that could work”.

“Our brain has a natural tendency to take mental shortcuts, which is the root cause behind many obstacles for innovation. Disciplined thinking is how you combat that.”

What’s more, if you’re an optimistic person, as most people working on innovation usually are, it’s easy to fool yourself to think that you have created something valuable even when you really haven’t. We often prematurely fall in love with that solution, instead of the problem.

Remaining highly analytical and rational in your decision-making while still being creative and aspirational is a tough combination for any person, or even for a team, to have.

Achieving that balance takes a lot of disciplined thinking. You need to stay grounded in reality, be willing to question yourself, and go back to first principleswhile still relentlessly moving forward. It’s a mindset anyone can learn, but that requires constant discipline to maintain.

Most organizations lack discipline

However, even if you are a good innovator, and have a great team that ticks all the boxes we’ve talked about above, it doesn’t mean that you’re automatically going to succeed.

One of the big barriers for that is the lack of organizational discipline. This is common for both startups and large organizations alike.

The idea is simple to understand. Just like an individual must remain focused to become great at something, so does an organization.

You need to make tough choices to have a clear strategy. That means saying no to a lot of things, so that you can focus on the things that will truly make a difference.

Clear focus and disciplined execution are necessary for innovation

Sometimes you might have to keep investing in these truly strategically important areas, even if there’s no quantifiable ROI in the near term. Again, at the same time, the organization needs the discipline to not think about sunk costs and ruthlessly kill innovation projects that have proven to not be able to live up to their potential to free up resources for the ones that have the best odds of success.

That might sound like a paradoxical combination, and to a certain extent, it is. But that’s what makes it interesting.

On the execution side, you need a lot of discipline to have clear roles and set clear goals so that people have the prerequisites for succeeding, but also leave innovators with enough freedom to explore the best way to reach those goals. Again, that is a difficult combination to achieve. It requires a lot of discipline at all levels of the organization.

In our experience, most organizations just aren’t there yet, even if many individuals within the organization would be, and that is a big barrier for innovation.

As a result, corporate innovators often end up burning out or losing their motivation just trying to navigate the maze of organizational hierarchy for one permission and approval after another before they even get to start working on an innovation. That is a clear sign of an organization that isn’t disciplined – or alternatively has chosen to not innovate.

Discipline in practice

We’ve covered a lot of ground, and most of that has been pretty abstract, so before we wrap up, I’ll share a more practical example with you.

It’s a cliché to use Steve Jobs and Apple as an example for innovation, so I don’t usually like to do that. However, for this specific topic, I think it’s the perfect illustration because people usually see Jobs as this creative visionary and the ultimate ideas guy who couldn’t care less about processes or discipline.

But in fact, the first thing he did when coming back to Apple in 1997 wasn’t to come up with cool new products. It was to introduce a ton of discipline in everything they did and ruthlessly cut back on anything that didn’t truly help them innovate and create better products going forward.

First, he cut 70% of the products the company offered, and as a result, had to lay off 3,000 employees.

Apple's innovations came from following a disciplined process

Jim Collins does a great job summarizing some of the other actions in his book Great by Choice:

“They cut perks, stopped funding the corporate sabbatical program, improved operating efficiency, lowered overall cost structure, and got people focused on the intense ‘work all day and all of the night’ ethos that’d characterized Apple in its early years. Overhead costs fell. The cash-to-current-liabilities doubled, and then tripled.”

That provided Apple with the financial stability needed to invest in innovation and allowed them to focus their leadership and top talent purely on creating new innovations that ended up shaping the future of the company.

Also, from the Walter Isaacson biography of Jobs (which I highly recommend), it becomes obvious how diligent and disciplined Jobs and the rest of the team at Apple were in perfecting every little detail of their products, processes, and even the look of their stores (sometimes to a fault).

Conclusion

To conclude, it takes a lot of discipline to succeed at innovation. That discipline is at least as important as the creativity we usually associate with the term innovation. And, because it’s so underrated, I’d argue it’s the part most of us need to focus on.

After all, it is that disciplined execution of an idea that usually makes the difference between those that succeed and fail.

Thomas Edison did a great job in summarizing discipline when asked about his failed attempts at a lightbulb:

“I have not failed. I have successfully found 10,000 ways that will not work.”

Discipline is, without a doubt, about putting in the work, but there’s a bit more to it than that. It’s also about staying focused and grounded in reality, both of which are well displayed in that quote.

“Being disciplined, both as an individual as well as an organization can be very challenging. The good thing is that it is a muscle that you can develop.”

Even if it might not be immediately obvious, lack of discipline either as an individual or as an organization, is the root cause behind a significant portion of challenges organizations face when trying to innovate.

To be frank, being disciplined, both as an individual as well as an organization, for extended periods of time can be very challenging. The good thing is that it is, figuratively speaking, a muscle that you can develop. Most would-be innovators and leaders just aren’t quite there yet.

If you recognize yourself or your organization from this article, there’s no need to hide that – and there’s nothing to be ashamed of. We’ve all been there. Each of us has areas in our life where we lack discipline, or at the very least, times when we’ve failed to keep that up.

In fact, as an individual or organization, you need to be honest and admit that this is a problem for you. Once you do, you can take steps to address that, and you’ll be much closer to becoming a successful innovator.

This article was originally published in Viima’s blog.

Image credits: Unsplash, Viima

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Scaling Innovation – The What, Why, and How

Scaling Innovation – The What, Why, and How

GUEST POST from Jesse Nieminen

Given that innovation is responsible for roughly 85% of economic growth, it’s without a doubt a pretty big deal for the success of both individual organizations, as well as for the society at large.

However, to achieve the level of impact that many are looking for from innovation, you can’t simply “create something new”, and then just hope the results will come. You will need to commit to systematically pursuing those results by scaling viable ideas into products or businesses that create value – at scale.

That is of course easier said than done. If you think it’s hard to come up with innovations, just try scaling one up. In this article, we’ll explore the topic in more detail and provide you with actionable tips on how to actually scale an innovation.

What does it mean to scale an innovation?

To explain what it means to scale an innovation, let’s first take a step back and look at the lifecycle of an innovation.

To begin, every innovation starts from a rough idea or concept. Often you may have a specific goal in mind, or a problem to be solved, but sometimes it can just be a cool idea that you think could really make an impact. From there, you first need to validate that the idea makes sense, and then build a product or a service that meets a real need in the market.

With these steps taken care of, the next part is to scale the innovation. At this point, we have all the pieces in place to create value, but we haven’t yet unlocked that value for the vast majority of the available market.

Lifecycle of an Innovation

So, as you may see from the chart above, scaling is the part where most of the value creation and impact comes from. With that said, we can define scaling an innovation as the process of expanding the presence and the use of the innovation to be as widespread as possible to maximize that impact.

Scaling innovation is the process of expanding the presence and the use of the innovation to be as widespread as possible to maximize the impact the innovation can have.

While on paper that sounds straightforward enough, it’s extremely important to first clarify the vision of what successful scaling looks like for your innovation, and what metrics you will use to measure your success here. For some, it might just be revenue or profit, for others it could be the number of customers or users, the impact you’ve delivered, and so on.

Most of these metrics are of course related, but when you start with the end in mind and gradually work backwards from there, you are much more likely to succeed because everyone in the organization will know what it actually is that you’re aiming for.

With that goal in mind, you can start narrowing in on the methods required to get there, which is what we’ll be focusing on next.

Dimensions of scaling an innovation

Traditionally, scaling innovation is seen as a matter of advancing the adoption, or the diffusion, of innovation. This is best visualized with a chart depicting the adoption curve, which you’ll find below.

Technology Adoption Lifecycle

The idea is that to scale an innovation, you need to cross that chasm and go from a few early adopters to the mainstream market where the volumes are significantly higher.

While that is certainly true, we can dig a bit deeper to understand scaling in a more nuanced, and more practical, way.

In reality, there are three dimensions to scaling an innovation.

Dimensions of Scaling Innovation

Let’s look at each of them a little closer.

Scaling Up

First, scaling up is about creating the preconditions for scaling effectively.

Before we start talking about scaling up, we’ll assume that the basic prerequisites for scaling are in place, namely that there’s a clear vision and a product-market fit for your innovation, and that the market potential is large enough for there to be something to scale to, even if the market isn’t there today.

Assuming those prerequisites are there, you need to ensure that:

  1. you can produce enough of the innovation to scale
  2. you can do that efficiently enough to be financially and operationally viable

For some products, such as software and other immaterial goods, that first part is pretty straightforward. For others, such as most complex manufactured goods, even the first one will be a real challenge.

Having said that, the second part of being efficient enough will prove to be a challenge for virtually every innovation. Even for a software product, acquiring, serving, and retaining customers profitably at scale is often more difficult than people realize. For other, fundamentally less scalable goods and services, this is often excruciating.

In addition to these two more practical aspects, there’s a third and more ambiguous component to scaling up, and that is the social and institutional adoption of the innovation.

How well you scale up affects how large of a scale you can ultimately reach.

For example, with an innovation as mundane as the modern umbrella, men who used it were initially ridiculed. So, before the umbrella could really take off as an innovation, societal norms needed to change. In other cases, there may be regulatory hurdles or other institutional considerations that might need to be addressed before an innovation can ultimately scale.

Regardless of the specifics, scaling up is necessary for every innovation that wants to reach significant scale.

However, what many people don’t pay enough attention to is that how well you scale up affects how large of a scale you can ultimately reach. If you can’t produce the goods at volume, and at low enough of a price while still being profitable at a unit economics level, there’s an obvious limit to your potential to scale.

Scaling Out

Scaling out is what most people think of when it comes to scaling an innovation. It’s the geographical or demographical expansion of the innovation to a larger audience.

In its simplest form, scaling out simply means getting a wider market share and audience for the innovation within an existing market. As we covered earlier, this typically means moving from those early adopter market segments towards the mainstream.

Scaling out is what most people think of when it comes to scaling innovation as it’s where you expand the innovation to a larger audience.

However, it doesn’t have to be limited to just that. Sometimes the same products or services can be sold and used in other geographical areas, or even in other industries or entirely different use cases, both of which unlock new markets and additional demand, and thus lead to a larger impact for the innovation. A well-known example of this is Tesla using their experience and innovations in electric car batteries to expand to stationary energy storage.

Paths for Scaling Out

Regardless of which path you choose, often these efforts to scale out to new segments or industries do require additional work to adapt the innovation or its positioning to the differing characteristics of these new segments, markets, and audiences.

Scaling out to new market segments can increase complexity a lot, so be mindful of the operational implications of your strategic decisions here.

This naturally adds complexity, which makes the scaling up part we covered earlier more challenging. So, be mindful of how you scale out and what the operational implications of your strategic decisions here will be.

Scaling Deep

The third, and the least well-known method for scaling innovation is scaling deep. This essentially means that you unlock more impact for your innovation by expanding and maximizing the use of it, typically for the people who already have access to it.

This usually requires you to either change people’s behavior to increase usage, or alternatively come up with innovative means for improving the utilization rate by enabling more people to make use of the same assets. Scaling deep is partly a matter of culture and mindset, and partly a more practical matter of having the right components in place for enabling and encouraging active use of the innovation.

Social Media

A classic, albeit somewhat controversial example of the first type would be social media algorithms. They are designed to provide users with engaging content to keep them entertained and thus stay in the service for longer, which leads to more revenue from the same number of users.

An example of the second type would be cloud computing. By adding network, virtualization, and software layers on top of the computing hardware, cloud providers can get more use out of the same hardware, which unlocks value for both the service provider and the customers.

This is how Amazon not just significantly reduced costs in one of their major cost centers, IT infrastructure, but actually turned that into Amazon Web Services (AWS), an additional growth business that now accounts for the majority of the profits for the entire organization.

Scaling deep is about unlocking more impact for your innovation by expanding and maximizing the use of it. This can help reduce the need to scale up or out, or alternatively maximize the impact from doing so.

Scaling Deep can reduce the need to scale up or out, or alternatively, maximize the impact from doing so. As such, it’s an excellent compliment for most innovations. However, it’s just that: a compliment. Your primary method of scaling should always be either to Scale Up or Scale Out depending on whether your bottleneck is more on the supply or demand side.

Even in the case of AWS, which has created entirely new vectors for scaling out and has dramatically subsidized their costs for scaling up, it obviously wouldn’t have been possible without Amazon already being at significant scale.

What’s the takeaway? These dimensions are distinct but very much intertwined.

If you can scale on all three of these dimensions in a coordinated way, you will not only be much more likely to achieve significant scale with your innovation in the first place, but also maximize the potential for scale and impact from those efforts. If you build momentum on one of the dimensions, some of that momentum will carry over to the other dimensions, which again helps you accelerate change going forward.

As such, pay attention to each of these dimensions and try to consider all of them in your plans to scale innovation. That doesn’t mean you should focus on all three from the get-go, on the contrary, but planning with the big picture in mind can allow you to make much more educated decisions.

Scaling innovation in practice

As we’ve established above, there unfortunately isn’t a one-size fits all solution to scaling innovation.

Achieving breakthrough success with an innovation, which is the goal of scaling innovation, always requires many related and adjacent (usually more incremental) innovations.

This is an extremely common pattern that you will see happening over and over again if you just start paying attention to it. Square co-founder Jim McKelvey has done a great job in describing that in more detail in his recent book called the Innovation Stack.

A well-known example is the lightbulb. Edison patented his famous design back in 1879, but most households didn’t yet have access to electricity, so it wasn’t something they could benefit from. It took countless other innovations and another 45 years before even half of US homes had one, even though the benefits were obvious.

In practice, scaling an innovation is simply an iterative and exploratory process where you focus on eliminating whatever bottleneck is preventing you from scaling, one by one. And, as we saw in the example of the lightbulb, sometimes these can be much bigger and more fundamental than you may think at first.

Process of Scaling an Innovation

Often you can just copy solutions other people have already used for the same or a similar problem (which you should always go for if you can), but many times you will also need to innovate something completely new and occasionally even go beyond your core product.

With that said, there are some common patterns that can be helpful for structuring your thinking when faced with some of these bottlenecks. However, as each innovation is ultimately new, and thus unique, these won’t necessarily fit every case.

Having said that, we’ll share one framework for each dimension of scaling below. We’ve also created a toolkit that includes the frameworks as editable templates, along with some examples and other supporting material, which you can download here.

Overview of Scaling in Practice

Demand side

For most organizations and innovations, the demand side is likely the source of most bottlenecks.

The way we see it, this is not just about drumming up interest and demand for your product, but also about making sure that it fits the needs and budgets of the buyers in your market. And of course, you need to make sure you’re in a market, or at least one that has the potential to become, large enough to accommodate your scaling efforts.

Unlike what people often think, product-market fit isn’t enough for a business to be scalable. You also need to have the right business and operating models, as well as use the right channels.

In other words, scaling out isn’t just about product-market fit, as people often mistakenly think. You also need to have the right business and operating models and use the right channels. Brian Balfour has written an excellent five-part series about this, which I highly recommend you read.

Product-Market-Model-Channel Framework

The basic idea is pretty simple: your business needs to align all of these aspects in a cohesive manner to be able to scale. If even one of them is wrong, growth will feel like, as Balfour puts it, “pushing a boulder uphill”. It will take way too much capital, effort, and time. However, get the four elements right together, and the growth will come naturally.

What’s important to understand here is that the model isn’t a static picture you just do once. If the market changes, or you run into challenges that force you to change one of these elements, you’ll need to review each element and make sure the big picture still works.

Supply side

For some products and businesses, especially those with physical products, the supply side often becomes a key consideration.

Here, the bottlenecks can be extremely varied, and dependences on external suppliers can lead to challenges that are hard to overcome.

In general, what top innovators do differently from the rest of the companies is that they almost always vertically integrate their value chain as they are working towards scaling up.

There are many benefits to this approach, such as reduced overhead, but the key differences are in increased quality, and most importantly, the company’s ability to control their own destiny and innovate more freely because they’re not being constrained by their supply chain.

Top innovators vertically integrate their value chain to address bottlenecks and turn cost centers into additional sources of growth and profit.

The classic example is Apple, and the way that they control both the hardware and software of their products. In recent years, they’ve been increasing that integration in both directions. They’re moving upstream to offer more services on top of their operating systems, as well as downstream by designing their own processors, which has provided them with a big performance advantage.

Apple vertical integration

However, there are many others. Amazon, Microsoft, Tesla, Google, Netflix, Nvidia, and pretty much every innovative company is trying to do the same in the scope of their own business.

The basic idea is again simple: if a part of your supply chain becomes a major bottleneck, or is a major cost center, you should try to take control of those parts to address the bottlenecks and turn cost centers into additional sources of growth and profit, just like Amazon has done with AWS, but also warehousing and shipping.

That isn’t to say that vertical integration wouldn’t be challenging or have downsides. It certainly is and does. Because of these limitations, it’s generally advisable to only vertically integrate to the parts of your supply chain that either are a clear bottleneck or could become a key competitive advantage for you. However, top innovators often have little choice but to take these steps if they want to move fast enough and have enough control to be able to scale their innovation to its full potential.

Vertical Integration

Another key consideration on the supply side is simply the architecture of your products and services, and the process you have for delivering them. It’s obviously much easier to have a scalable architecture and automated processes for purely software or content focused businesses, but how you craft these does  play a huge role for complex physical products too.

This is again a very extensive topic on its own, but the goal should be to try to make the manufacturing, delivery, and service of your products as seamless and scalable as possible. As with everything else we’ve discussed so far, this too is an iterative process.

However, to provide you with a slightly more practical framework to get started, here’s Elon Musk explaining how he’s learned to approach this topic after his early struggles of trying to do that with the extremely complex products at SpaceX and Tesla.

While Musk specifically talks about the process in the scope of engineering for scale, these same principles also apply to your organization and internal processes too.

And, as Musk explained in the video, it’s easy to get tempted by the promises of optimizing for efficiency and automation, but if you haven’t addressed the big picture first, these will often end up just being a big waste of time and money.

So, make sure to start by first eliminating those unnecessary requirements and parts or tasks, and try to simplify the design before you focus too much on optimizing for efficiency and automating.

Process of Engineering for Scale

Utilization

In addition to supply and demand, we still have the third dimension of utilization to cover. The idea with this “scaling deep” part is to find creative ways to make the most out of existing supply to either unlock new demand, maximize the utilization of those assets, or simply to increase your customer retention by finding ways to get more value for them from your products.

As you may have guessed by now, the specifics vary quite a lot on a case-by-case basis, but the flowchart below can hopefully serve as a starting point for your efforts in this area.

Pathways for Scaling Deep

To summarize, there are three common paths you may take here.

The first is to find ways to increase the usage of assets that are only being used a fraction of the time through practices such as asset sharing and virtualization.

The second is to move from one-off purchases to a subscription to eliminate friction and increase the usage of the services.

The third is to find additional ways to expand the use of the product. This is usually done either by finding new value-adding uses for the same product, or simply by activating usage through means such as improved quality, usability, better communication etc.

However, sometimes it might even be necessary to work around tougher and more pervasive issues, such as regulatory considerations or even the changing of societal norms.

While increased utilization isn’t often that glamorous or exciting, it can really make a difference in making your business and operating models efficient enough to allow you to scale volume faster and more sustainably.

Conclusion

Scaling an innovation won’t be easy. It will always take years, and an endless amount of hard work with an extreme focus on solving each and every bottleneck standing in your way.

Hopefully you’ll find some of the frameworks and playbooks we’ve introduced in this article useful for shaping your thinking, and for building your organization and processes, but you’ll inevitably come across plenty of challenges where you’ll just need to figure out the solutions yourself. Still, if you want to truly succeed with innovation, that’s what you’re in for.

So, be prepared for those challenges, and be realistic with your expectations and timelines. For example, the “growth gap” can easily sneak up on your organization if top management has unrealistic expectations for the financial returns of innovation.

In general, large organizations have some disadvantages, but they also have huge advantages when it comes to scaling an innovation, so look for ways to leverage those advantages to your benefit.

And finally, make sure to surround yourself with top talent that’s prepared for the ride. Scaling innovation is teamwork, and it takes a special kind of a team to pull it off. You need people that are used to constant change, have a growth mindset, and the skills needed to solve whatever problems your domain may have.

As mentioned, scaling innovation is a journey that happens in small increments, and at times, it will feel frustrating. But if your team persists, keeps on learning and solving problems, you can eventually close in on whatever the full potential of your innovation is.

Image credits: Pexels, Viima

This article was originally published in Viima’s blog.

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