Everyone talks about Innovation as a broad, esoteric concept, but when it comes to executing we see far more false starts than we do success stories. This is the first in a two-part series designed to help explain some to the key tools in the innovator’s toolkit that ensure innovative THINKING turns into innovative DOING.
Part 1: Defining your Innovation Goals
Crucial to successfully executing an innovation strategy is a clear definition of the type of innovation being pursued, and how that fits into the overall strategy of the business. Without this definition, teams will struggle to meet their objectives and the strategy will fail.
Innovation can be split into four categories:
- Incremental Innovation utilizes your existing technology, building on these to provide more value to your existing market. This innovation is important for the continuous improvement of your value proposition in the short term.
- Architectural Innovation applies your existing technology to a new market. This innovation occurs in the short to medium term.
- Disruptive Innovation involves applying new technology you have developed to your existing market. This innovation occurs in the medium to long term.
- Radical Innovation is the application of new technology to a new market. This innovation is the long term strategy of your business.
In previous blog posts we have discussed the role of the three horizons model and how it can be used to support multiple, concurrent strategies for the short, medium and long term. The four types of innovation can be broken up according to similar principles. Whereas incremental and architectural innovation are important in extending the lifecycle of an existing business, it is through disruptive and radical innovation that organisations are able to lay the foundations for their next business.
Building a Balanced Portfolio
It is important to note here that your types of innovation do not have to be mutually exclusive, in fact, it’s a mistake to only pursue one type of innovation. Instead, successful businesses looking to sustain competitive advantage maintain a portfolio of innovation initiatives.
Nagji and Tuff suggested the 70 – 20 – 10 rule, where 70% of resources are allocated to incremental innovation, 20% to architectural or disruptive innovation and 10% to radical. While this formula isn’t foolproof, it can help ensure that long term objectives are not being furthered at the cost of short term goals, or vice versa. The reality is that the best breakdown for an individual organisation will depend heavily on both ambition and environment.
Innovation Execution Approach
Certain types of innovation lend themselves towards a specific approach. At a high level these approaches can be classified as either open or closed. “Open” being those innovation activities that are conducted outside of the organisation and “closed” being activities held only within the organisation.
For radical or disruptive innovation the speed, freedom and resources available in open innovation is generally the most effective. An exception to this however would be a highly competitive industry where intellectual property is a highly effective way to gain a competitive advantage e.g. pharmaceuticals, in this case closed innovation would be crucial to the success of the company’s strategic objectives. Closed innovation is more effective for incremental or architectural innovation where an understanding of the companies structures and industry makes it easier to integrate new changes and ensure alignment with the company’s current direction.
This covers the three main considerations to consider when you are defining your innovation program. This definition not only helps create the required confidence from sponsors, but it also helps innovation teams work effectively.
Our next post will build on this topic, and examine how to best structure your resources within an innovation capability, what skills and personalities you need on your team, and some key challenges that are often faced by organisations trying to move bring new innovations to market.