Succeeding at innovation as always been paramount to the long term success of organisations. More often than not, it is an existential issue. For a long time, many organisations viewed innovation as a nice to have, something that can be pursued in boom times, when there is spare budget. More recently, majority of organisations have come to accept the need for sustained practice of innovation. Against this backdrop, in this article, I outline what innovation is and how organisations can ensure they are able to build a world class innovation ecosystem to sustain high levels of innovation performance within their organisations.  

What is Innovation

Innovation is the process of transforming ideas to create new value, through the use of technology, and or, business models. Creating new value lies at the heart of innovation, with technology and business models being the levers used to achieve value creation. 

Technology innovations are innovations that are purely focused on new or improved products, new or improved services and new or improved processes, whilst Business model innovations are innovations that focus on new or improved value propositions, improving the supply chain or accessing current non-consumers. In addition to the above two, some innovations are a hybrid of both technology and business model, simultaneously using both the technology and business model levers.

The outcomes from both the technology lever and business model lever innovations falls under three types of innovation as discussed below.

Note – Classical Innovation types, only define 3 types, the adaptation is used to clarify semi-radical innovation that deals with either new offerings (products, services or business models) or new markets.

These four innovation types fit into a classic 2 x 2 matrix of Offering (Products, Services, Business Model) vs. Target Market

The above matrix is one representation of the types of innovations. Other approaches have used Business Model and Technology to represent the x and y axes of the model respectively. This alternative representation results in a different definition of these innovations, compared to the ones given below in this article.

Incremental innovation is the lifeblood of organisations. They are minor or small improvements to existing products, services or business model that are delivered into existing markets. Incremental innovations help to fight-off imitation or commoditization of a company’s offerings and protects market share.   Incremental innovations can be viewed as cash cows, they can preserve and or increase revenue. They can also improve profit margins, when they are targeted at enabling technologies and operational efficiency. However, incremental innovations are unlikely to change the competitive landscape by transforming an organisation from challenger to market leader. Whilst they are a necessity for all organisations, an over reliance on them can prove detrimental, especially in industries with frequent discontinuities.

Semi-radical innovations have the ability to cause major changes in the competitive landscape through introduction of new technologies or new business models. The first type; Semi-radical innovation (market), involves using existing technologies or business models to target new customers, markets or market segments. The second type; Semi-radical innovation (offering), involves introducing new technologies, technological application or business models to existing markets. The second type has the potential to disrupt and help an organisation to ultimately challenge market leaders / incumbents for greater market share. Think Uber.   

Radical innovations are those innovations that use new technologies and business models to create entirely new markets. By the definition of creating entirely new markets, which is employed in the above matrix, radical innovations are rare. Many innovations that have been termed radical such as the iPhone, Salesforce CRM, Metromile, amongst others, would typically fall under Semi-radical or disruptive innovation. In the case of iPhone, which is perhaps the most popular innovation that is widely regarded as radical, not only did the iPhone not use entirely new technologies, it was also not the first smartphone on the market, if we define the new market as the smartphone market. Whilst the iPhone, which without a doubt revitalised and shaped the market, was launched in 2007, the very first smartphone (Simon Personal Communicator or IBM Simon), which represented a radical innovation at the time, was launched by IBM in 1992.

---

How to Succeed at Innovation

In writing this article, it almost felt inappropriate to include a section on “how to succeed at innovation”, simply because it may give the impression that succeeding at innovation is easy and can therefore be covered in a single article. However, whilst it is not possible to cover every single aspect of what organisations need to do if they want to succeed at innovation, here I provide an insight into the most important areas that business leaders must focus on when attempting to build a successful and sustainable innovation ecosystem for their organisations.

Succeeding at innovation has many requirements. To understand what is required, we need to understand the innovation process itself.  Successful innovation demands that organisations capture the maximum possible economic benefit of their value creation. Consequently, the process of successful innovation involves; generating ideas, deciding which ideas are worth developing and successfully developing and commercialising those ideas, by turning them into economic rewards (higher revenues, cost savings, market share, higher profit margins etc.). 

​The activities of generating ideas, working out which ideas to pursue and developing ideas, all exist in the sphere of creativity and this normally creates a tension with the dominant logic of value capture within most organisations.   Consequently, for innovation to flourish, there must be an organisational set up that allows value creativity to flourish alongside value capture. Managing this tension between value creation and value capture is not easy, but it lies at the heart of sustaining innovation performance.  The top 10 areas organisations must focus on to reach and sustain high levels of innovation performance are thus explored below.

---

1. Leadership Steer & Support for Innovation

Where an organisation ends up is more often than not a result of the direction the leadership steers that organisation. Similarly, for organisations to succeed at innovation, they require the effort to be driven and supported by the leaders. Leadership support here is preferably the CEO actively leading the innovation effort, because if innovation is an existential issue for an organisation, there should be no issue more important for the CEO than ensuring the organisation sustains a high level of innovation performance. In organisations where the CEO is not able to lead the innovation effort, it is becoming increasingly common to create a Chief Innovation Officer role. The CIO, as a member of the organisation’s leadership team, will thus lead, manage and take full responsibility for innovation matters. 

Why the steer and support of leadership is so important to innovation stems from the fact that most of the challenges that plague innovation in organisations, such as risk aversion and fear of failure, lack of resources, value capture bias and so on, are issues that can only be resolved through the decisions and intervention of the organisation’s leadership. Similarly, all the actions and behaviours required to make innovation sustainable within the organisation - crafting an innovation strategy to provide alignment and direction, accepting experimentation, investing time and resource in the different tools and stages of the innovation process, legitimising innovation through rewards, recognition and career paths – are all behaviours and actions that can only be accepted, implemented or executed based on leadership support and approval.

Commitment to innovation must emanate from the boardroom. It is not sufficient to have innovation has a buzz word at the town hall or in the organisation’s mission or vision statement. Instead, organisation leaders must set out a roadmap for the rest of the organisation to follow. This roadmap must include a coherent innovation strategy making it clear where the company is planning to play in the innovation sphere, there be must clear indication of how innovation will be supported across the organisation with both leader’s time and core organisation’s resources. 

---

2.   Craft an Innovation Strategy and Align it with Business Strategy

One of the key cornerstones of practicing innovation successfully is to have a clear idea of how your organization is choosing to innovate. Empirical data in separate research works carried out by AT Kearney and PwC supports the view that a coherent innovation strategy separates the best companies from the rest. 

However, innovation strategy must not be as an afterthought to the overall business strategy. If business strategy is about using the firms core resources to establish a desired position within the competitive landscape and innovation is about sustaining value creation to enable the company to fight off commoditization, to disrupt or avoid disruption, then clearly there is a very close link between the objectives of business strategy and the role of innovation. Consequently, innovation strategy must be aligned with business strategy such that both are intertwined and reinforcing one another. In formulating innovation strategy in this way, corporate strategy is incomplete without innovation strategy. 

When formulating the innovation strategy, business leaders must examine both the macro and micro context that the organisation is operating in. This requires answering the following questions;

What is the degree of market discontinuity risk?

What are the industry trends and how might they evolve?

What is our competitive position risk?

What are our organisation’s internal constraints?

Based on the organisation’s view on the above, it will be possible to ascertain if it is more appropriate to innovate within the context of the organisation’s current markets using incremental innovations or if the organisation should be trying to innovate in new technological or business model areas by creating semi-radical or radical products, services or business model. More often than not, organisations would find that it is more appropriate to play in both the incremental and radical spheres as a strategy to defend the organisation’s position in the immediate market dynamics as well as respond to evolution of the industry and possible disruption and discontinuities. 

Without the clarity of a well-articulated strategy from the organisation's executive team, it will be difficult for the workforce to understand how and where to pursue innovation. Such a scenario typically results in poor innovation performance. 

---

3.   Invest Time and Resource in Idea Management

Every value creation starts with an idea. Despite this, I have experienced organisations pursuing innovation with no discernible means of managing ideas, yet they wonder why they are not generating enough ideas or why they are developing the wrong ideas. In some of these organisations, ideas championed by people with influence generally gets developed and a lot of times those are far from the best ideas. To sustain innovation performance, business leaders must look to invest in Idea Management.

Idea Management is the process of systematically fostering idea generation and the subsequent screening and ranking of those ideas, in order to emerge with the most valuable ideas to support the innovation process. Data reported in an AT Kearney research on innovative companies, shows that innovation leaders spend approximately 30% of their innovation efforts on idea generation and screening (i.e. idea management). This validates the view that idea management is crucial to innovation success.

Idea generation. Business leaders must ensure they are harnessing the ideas that reside in every part of their innovation ecosystem, both internally and externally. 

Internally, organisations must educate employees on methodologies for coming up with ideas. Aha moments are not sufficient for sustaining high performance levels in innovation. One of the approaches to use for idea generation is to seek the value denials in existing products, services and business models. Value denials are possible use cases that are both desirable and feasible but are not being supplied to the market in existing products or services. In effect, it is a dimension of performance that currently isn’t supplied at any price. A classic example of value denial was the Sony Walkman, which in itself solved the value denial of portable music. However, further value denials existed in the Sony Walkman. The first was a desire for further miniaturization and another was the desire to have significantly high volumes of songs accessible within the device. These value denials were both addressed by the iPod. 

Another methodology that can be used for ideation is the SCAMPER model. SCAMPER represents a mnemonic as shown in diagram below.

SCAMPER is a very powerful tool that enables ideation, creativity and problem solving by providing a framework to brainstorm and investigate up to 7 possible ways to transform your product, service or business model into a new offering.

Idea Screening & Evaluation. Generating ideas is one half of idea management. However, all ideas are not created equal. This is why competent and rigorous idea screening, evaluation and ranking are the crucial other half of idea management. The purpose of screening is not to limit the amount of ideas that are moved forward, but to ensure only the very best ideas are transitioned into development and commercialization. Screening and ranking is akin to weeding a garden to ensure the most beautiful and radiant flowers can flourish. Without a sound methodology to screen ideas, low quality ideas will slip into the development stage. This typically allows very promising ideas to be competing for funds and resources with other ideas that should have been eliminated through proper screening. The result of this is projects that are underfunded and ultimately unfulfilled.

Whilst there are many idea evaluation methods and models, one that organisations will find invaluable and should consider using is InnStrat's InnoScreen. The methodology helps the organization to focus on six key areas that are crucial to innovation success, from an early stage. 

The methodology helps to expose biased or weak assumptions, identify problems, contain risk and ultimately reveal the true potential of an idea to allow a decision to be made over whether to continue or terminate the development of the idea. InnoScreen is an advanced methodolgy based on a framework that has been used to great effect by some of the world’s most successful innovative companies, such as 3M, Novartis, Honeywell, General Electric etc.

The execution of collecting all ideas generated, ensuring ideas are not vetoed by individuals with value capture bias, ensuring equal traction for ideas and maintaining a consistent screening and evaluation approach can prove to be a challenge in itself. For this purpose, organisations can deploy an idea management platform that captures and tracks every idea submitted, allows crowd sourcing of ideas and also supports evaluation of ideas. These platform, although not entirely new, are becoming increasingly popular as a means of successfully managing the idea capture and screening phase of the innovation process. When selecting an idea management platform, business leaders must ensure they opt for a platform with strong idea evaluation methodologies. This is key to evolving the best ideas and ensuring success.  

---

4.   Use the Open Innovation Model and Build Networks

Whilst employees are always a good source of ideas, the ideas that reside outside the organisation must not be overlooked. Some of the leading innovative companies that practice open innovation, including Netflix, Eli Lilly, and Linux etc. have shown that external influences and contribution is able to significantly improve innovation performance as well as reduce the cost of innovation. In practicing open innovation, organisations must leverage  external resources; including but not limited to the knowledge of suppliers, research institutions, subject matter experts, customers, non-consumers etc. Open innovation can be practiced using either a front end or an outbound approach. 

Front End Approach is particularly useful for organisations looking for inspiration in the areas of idea generation or screening. With front end approach of open innovation (see diagram below), organisations look for early external influences in the innovation process, such as working with third parties for idea generation and participatory development.    

The primary objective of the front end approach is to facilitate help with idea generation, acquire necessary skills to provide critical product or service development breakthrough information, provide prototyping (practical proof of concept) of the idea at early stage of development. These can be achieved either through direct collaboration or by running open innovation challenges. These input from external networks of the organisation will serve as the foundation upon which the innovation can be developed and ultimately commercialised.

Outbound Approach open innovation is relevant for organisations looking for collaboration in concept development and commercialisation. This can either be via selling proprietary innovative technologies in the form of intellectual property, licensing etc. or through Innovation Venturing, which may involve forming new organisations via partnerships, joint ventures etc. 

The primary objective of the outbound approach is to enable successful commercialisation and penetration of all possible markets by partnering with the necessary external networks.

---

5.   Build & Maintain a Risk Profiled Innovation Portfolio

A risk (or success) profiled innovation portfolio is built by rigorously assessing each innovation against the organisation’s current competencies, resources and served market. The result of each innovation assessment is then used to position the innovation in one of the four quadrants of the matrix. As more innovations are positioned in the matrix, a clear picture of the spread of projects from low to high success probability emerges. The key information provided by the matrix is that, it reveals the level of risk and organisational stretch present in the company’s overall innovation portfolio. This is a key piece of information required in managing risk and ensuring that innovation activities are aligned with the strategy.

---

6.   Measure Performance at Regular Intervals

As the saying goes, “If you can’t measure it, you can’t manage it or improve it”. Understanding the current level of performance and how it is supporting the innovation strategy is important for successful innovation outcomes. This understanding can only be derived from regular performance measurement. However it is not a case of the more that is measured, the better. Innovation performance measurement should be focused on two key areas. 

The first area is to examine the organisation’s performance and how it relates to leadership support and the different stages of the innovation process, which are;

Leadership Support

Ideation

Idea Screening & Selection

Idea Development & Commercialisation

A performance diagnostics of the above areas will naturally show that the organisation is performing better in some areas than others. After completion of the diagnostics, there should be an action plan on how to improve the weakest link and thus strengthen the overall innovation process. 

The second area of performance assessment is to examine particular metrics that are linked to the innovation strategy and see if performance in those areas are good enough to help realise the strategy. As an example, an innovation strategy that is geared towards radical innovation and practicing more open innovation should have metrics for those particular objectives. There must be set targets made by the company such as,

“Generate 20% new ideas externally in the first 12 months of implementing the wider open innovation process”. 

“Generate minimum of 5 radical innovation ideas with a minimum of one passing screening and evaluation stage during the first 12 months”.

By setting these targets and monitoring performance at regular intervals, the organisation can have a clear idea on the progress and make necessary changes to improve performance or pivot as may be required.

---

7.   Design Rewards & Recognition that Supports Innovation

Rewards and recognition are timeless ways of motivating human beings. More importantly, organisations typically create rewards and recognitions for behaviours and activities that are accepted as part of the organisation’s DNA and want to be encouraged. To encourage more innovative activities, rewards system within the organisation must be designed to target creativity as much as it is to target value capture. In most organisations, rewards are most likely existing for value capture activities; such as meeting the financial year’s target, working under or within the allocated budget etc. If such rewards are kept in place without modification, whilst introducing new rewards for innovation, it will be difficult to motivate the employees to shift their behaviour towards rewards that may be perceived as more difficult to achieve and may not materialise in the short term. Consequently, organisations must look to reduce some value capture rewards when introducing innovation focused rewards. It is however important to find a delicate balance here and not give the wrong impression that the value capture activities are no longer important. This is part of the tension between creativity and value capture that needs to be managed.   

Innovation rewards should be designed with two objectives in mind.

The first objective is to ensure rewards are designed to encourage diligent, purposeful and result oriented participation. For example, a result oriented reward will be to offer rewards for ideas that are accepted after screening and evaluation. This will be more productive than offering rewards for just submitting ideas. Such a reward targeted at submitting ideas, is likely to do little more than causing the idea management system to overflow with very little noteworthy ideas.

The second objective is to use reward to encourage long term commitment to the creativity and innovative behaviours. This can be achieved by running an innovation league or gamification board where the leader or leaders of the gamification will be given a separate reward at the end of a set period. This could be at the end of every year. Such an approach will drive commitment to innovation througout each year.

Rewards should also be designed to match the level of contribution or creativity. As such, a developed and commercialised incremental idea can be rewarded with cash based compensation whilst a developed and commercialised radical idea with transformational results might be more appropriate to be rewarded with stock-options.

By creating such rewards for innovation related activities, the organisation's leaders send out a message that innovative behaviour and a commitment to creativity is welcomed and will be adequately rewarded. With the right balance between creativity incentives vs value capture incentives, the organisation’s employee will show more commitment to innovation.  

---

8. Always Couple Technology Push with Market Pull

Innovation models have evolved over time. The very early model of innovation was typically R&D driven; a technology push approach. This was quickly followed by the market pull approach, which is customer-led and then transferred into the R&D and development process. Both of these model however have significant limitations.

The risk that lies in a pure technology push approach is not validating that value is being created or that the value being created is what the customer actually wants. A case in point for this limitation can be seen in the example of how Gillette introduced better but more expensive batteries (Duracell) to a consumer market that only wanted cheaper batteries. This was a classic case of technology push failure. With the market pull approach, the widely known and extended quote of Steve Jobs; “the customers don’t know what they want until you put it in front of them” or that of Henry Ford, who said, “If I asked people what they wanted, they would have said faster horses”, both encapsulates the limitation of this approach. Basically, relying on customer insight only, by simply asking them what they want, will more often than not result in incremental innovations. 

Based on the known limitations of the early innovation models, a better model that combines the strengths of these two approaches, has been used to successfully execute both incremental and radical innovations. This is a coupling model, one that feeds off both technology push and market pull and assembles a cross-functional team to execute the end to end innovation process (from idea generation to commercialization).  Such a model will be balanced in its technology and customer orientation. If such a model had been used by Gillette, its technology push error could have been avoided by using the marketing function to understand customer preferences.

Whilst the open innovation model has also been recommended, organisations need to practice this coupling approach even when practicing open innovation. In essence, an organisation’s innovation efforts should be driven by an interactive feedback approach that includes the target customers. The feedback approach must uncover new demand, validate internally derived value denials, new technology or business models, through market surveys. These should be done in the early phase of idea development (whether closed or open) to enable necessary product or service design modifications. When used objectively, this model helps to de-risk the innovation effort.

The objectives of this model, which includes ensuring that the customer preferences, pain points, functional and emotional requirements are thoroughly researched or radical ideas driven by technology are validated through customer engagements are evident in many of the commonly sited and used innovation frameworks; such as Working Backwards, Design Thinking, Lean Start-up, Job to be done etc. 

---

9.  Craft a Path-to-profit for every innovation project

So an idea has been birthed, it’s been validated that the market is real, the organisation can definitely compete and it’s worth pursuing; happy days, success guaranteed? Not quite. The fact that an idea is brilliant and has a significant target market, does not guarantee success. Capturing the value (commercialisation) of an innovation is the final and most important part of the whole journey. Commercialisation or rollout becomes a barrier to innovation success when organizations takes it for granted that every good idea or innovation will sell itself. However, the reality is that effective commercialisation of an innovation is far from guaranteed and needs to be built into the process as early as the idea development stage. To avoid sluggish rollout - which can hand competitors an opportunity to pre-empt and penetrate certain geographical markets before the innovating organisation - the innovation team must craft a path-to-profit plan as part of the concept development. Crafting a path-to-profit requires the innovation team to map out the necessary requirements (both internal and external) for launching the product or service in the intended markets. 

Internally, within the organization, large organisations especially, the innovation team must ensure all necessary functions and approval personnel are carried along and convinced through the innovation process, right from idea screening through to funding and development. These key internal stakeholders, especially those with marketing and regulatory roles, including those in the different geographical markets to be penetrated, must be fully on-board. These stakeholders are critical to ensuring all necessary local market requirements or approvals are in place to enable a quick and efficient product or service rollout in the different markets.   

Externally, the innovation team, working with other internal stakeholders must establish the product or service value chain right up till the final consumer, whilst the development is still ongoing. This is even more crucial for semi-radical and radical innovations, where new business model might be required or new elements might be required in the exisiting business model or supply chain. This must include understanding all customer touch points, understanding and fulfilling all regulatory requirements, as well as identifying the necessary marketing and distribution channels.  

---

10.   Weave Innovation into the Organisation’s DNA

Most of the foregoing areas to help innovation flourish are about getting innovation to become a part of the organisation’s DNA. However, this is so critically important that it still warrants a separate mention on its own. As organisations grow, there is a natural tendency for its dominant logic to gravitate towards value capture. Financial year targets rooted in value capture and shareholder management focused on metrics like dividends per share, comes to the front and centre of management’s thinking. On a continuum, these priorities reside at the opposite end to innovation. Under these types of organisation focus, innovation will struggle to gain traction. To turn the tide and weave innovation into the organisation’s DNA, the budgeting, performance metrics and encouraged behaviours must be changed. Whilst budgeting and metrics are easily changed by management, buy-in from middle management and the rest of the organisation who will be responsible for execution may be more challenging. The following measures will help drive penetration into the organisation DNA.

Enable hierarchy bypass for innovation. Before innovation is truly running through the blood of everyone in the organisation, allowing innovators to bypass superiors in their quest to support the innovation effort becomes necessary. One area where hierarchy typically kills innovation is at the early stage when an innovator has an idea. If the path of that idea reaching the right audience for evaluation and development depends on going through an unconvinced manager, that idea is pretty much doomed. Such barriers can be eliminated by adopting tools or creating processes that enable innovators to have direct access to key decision makers. An example of such a tool will be an idea management platform, which allows innovators to put their ideas directly into a platform where it gets direct exposure to the organisation’s leadership.   

Secure quick wins early on. Quick wins, i.e. innovation projects that have delivered quick returns, are a good way to win over the sceptics in an organisation. It is difficult to argue with empirical evidence. If the sceptics see the impact of innovation on the business early on, they are likely to start having a mind-set shift about the true value of creativity.

Give permission to fail responsibly. Fear of failure ranks high amongst the reasons why many people and organisations stay away from innovation. In many organisations experiments and failure in particular, are career killers. To encourage people to innovate, they must be rest assured that if an innovation experiment or project doesn’t deliver, their job is not on the line. Failing as a result of recklessness, carelessness or blindly defending vested interests (pet projects), should of course be frowned upon and everybody must be made aware of this distinction.

Create career path for innovators. Hiring specifically for innovation roles and creating a career path for innovation will legitimise innovation in the minds of everyone in the organisation. Career paths that goes all the way up to executive management (such as Innovation Director) or board role (such as Chief Innovation Officer) should be considered. In addition to legitimisation, this also creates defined responsibilities and accountability for innovation initiatives, efforts and results.

Include innovation in the yearly budget. In many organisations, there is an abundance of good to great ideas. However, in some of these organisations, the yearly budget is allocated to play the short term game (the day to day value capture activities). The result is that ideas end up dying out as they are never developed and commercialised because their benefits to the business cannot be realised within the current financial year targets. Organisations serious about succeeding at innovation should not leave innovation ideas or projects lying around, waiting for the year when there is spare budget. Instead, organisations must allocate a yearly budget dedicated to support innovation tools, processes and activities. Such an allocation will imply that innovation is part of the core business of the company.

Incubate or create innovation ventures. In circumstances where innovation is struggling to thrive inside the main organisation, the leaders should look to remove innovation from the firing line. The primary objective here is to shield innovation platforms and innovation projects from organizational procedures or value capture bias that are likely to cause hindrance. The degree of shielding can vary from minor to total separation. A total separation approach will involve creating an entirely separate start-up (an innovation venture) to run a semi-radical or radical innovation project. Where total separation is not possible, a new business unit or merely a dedicated innovation project team, with dedicated space and resources can be used to insulate an innovation project to operate independently within the existing organization. Whatever approach is taken, it is critical to resource the innovation team with the right talent (See; Innovation: Do you have the best team for the job?). They should have autonomy so that they can break the rules and practice contrarian thinking, which is required for semi-radical and radical innovation success. Despite the need for autonomy and insulation for innovation projects, they must also still be given access to additional resources, when required from within the larger organisation.