In this blog I want to cover one of the biggest challenges that CXOs face when driving innovation – namely being able to describe what innovation is and what innovation isn't. This is not as easy as it may seem and this blog is certainly not long enough to rehearse all the arguments, so let me slide right to the point of providing you with a framework I use to help clarify the debate. I am by nature inclusive so I have developed a broad framework through which to look at this thorny issue.
To me innovation can be generated at four different levels. Each level is fundamentally different from the others. Each level requires different investment profiles, governance and disciplines to deliver its outcomes.
Level of Innovation - Business Enhancement
Key Features - Packaging and Sharing existing IP, Best Practices etc across an organisation. Continuous improvement.
Infrastructure Required
· Excellent internal knowledge management capability.
· Rewards given for knowledge management/sharing.
· Executives targeted on uplift/savings gained from demonstrable adoption of best practice
· Local governance process required to manage release scheduling & change management
Expected RoI
In the range of X to 2X (year 1) and X to 4X (year 2 +) where X is the cost of delivering the infrastructure required
Good Hit Rate – 1:3
Who’s Good – Samsung, Tesco
Level of Innovation - Organic Market Expansion
Key Features - Using your own resource to develop new products, services and business models to expand the current market
Infrastructure Required
· Substantive innovation governance model and process required
· Access to ideation sources secured
· Access to prototyping capability secured
· Substantive seed funding secured
· Executives targeted on uplift/savings gained from demonstrable adoption of new products, services, models etc
· Agreement on “what does success look like” – i.e break even Year 1, 2 out of 10 ideas generates benefit Year 2 etc
Expected RoI
In the range of -Y to Y (year 1) and –Y to 10Y (year 2+) where Y is the cost of delivering the required infrastructure
Good Hit Rate – 1:8
Who’s Good - Philips, Unilever
Level of Innovation - Inorganic Market Expansion
Key Features - Partnering with 3rd parties to develop new products, services and business models to expand the current market
Infrastructure Required
· Substantive alliance governance model and process required
· Effective collaboration culture –capability for creating and utilising partnerships and alliances (including legal support) secured
· Substantive funding secured
· Executives targeted on alliance benefits
· Board level mandate secured
· Agreement on what success looks like – e.g. revenue derived from partnerships and alliances = x% of total revenue by end year 2
· Can require M&A capability
Expected RoI
In the range of -Z to Z (year 1) and –Z to 10Z (year 2+) where Z is the cost of delivering the required infrastructure
Good Hit Rate – 1:5
Who’s Good – Google, Microsoft
Level of Innovation – New Market Development
Key Features - Developing new products, services and businesses to create new markets
Infrastructure Required
· World class innovation governance model and process required
· Access to multiple ideation sources secured
· Access to prototyping capability secured
· Access to incubation capability secured
· Substantive funding secured
· Executives targeted on revenue/profit generated from launch of new businesses
· Agreement on “what does success look like” – i.e 2 new businesses launched by Year 3
Expected RoI
In the range of -Q to Q (year 1/2) and –2Q to 100Q (year 3+) where Q is the cost of delivering the required infrastructure
Good Hit Rate 1:10
Who’s Good: Apple, 3i, Google
As the above demonstrates Innovation comes in many shapes and sizes. A first step is to figure out what outcome it is that you actually want.
More to come on Innovation in a future blog
No comments:
Post a Comment