There we have the history of civilisation in 10 great leaps of innovation. Fire, Wheel, Paper, Printing press with moveable type, Michael Faraday who discovered semiconductor properties, AGB with the first phone, Signore Marconi, the three guys who gave us the transistor and Ted Hoff who invented the microprocessor. And here we are, at the apex of development, sipping on our green and white and texting the irony of it all to the world on our smart phone.
Sure, the list could be much much longer. And not all innovation changes the course of history. Much has been written about creativity and innovation. In this note we talk about the questions to ask if you want to include Innovation in your strategy. Strategy Map is our planning tool of choice at StrategyWorks. Therefore this note draws on the thinking of Kaplan and Norton on how to build innovation into your strategy.
K&N suggest four generic processes to build innovation into your strategy.
- Identify opportunities for new products and services.
- Manage your research and development portfolio.
- Design and Develop new products and services.
- Bring new products and services to market.
1. Identify opportunities for innovation
What is your process for lifting opportunities out of the everyday? Do you have a list of sources for new ideas, inside and outside your organisation? Do you have a process to regularly comb through these sources for new ideas? In addition to universities and laboratories, sources may include, suppliers and strategic partners and customers. Do you have a process to relay customer complaints from your call-centre to your innovation team? How do you get ideas from those who are not (yet) your customers?
2. Manage your innovation R&D portfolio
How do you collect, harvest, cultivate, fund (or defer or kill) and develop your ideas? An innovation strategy will depend on an ongoing process to review ideas as well as projects in progress in the light of delivery and new opportunities. K&N suggest the following mix of projects:
- Basic research and advanced development projects, which you may outsource.
- Breakthrough development projects to establish a new product category or a new line of business. These may extend over a number of years.
- Platform development projects to develop the next generation of products in a category. These may be similar to current products but may include new features based on the availability of new technology.
- Derivative development projects to enhance particular features of a current product for a specific target market.
- Alliance projects to take on products from other organisations.
3. Design and develop new products and services
What is your production process? In this process, ideas are taken from concept to the product and supporting processes. The final product in a successful process has desirable functionality, is attractive to the target market, and can be produced at consistent quality at a cost enabling reasonable profit. In their ‘Blue Ocean’ process Kim and Mauborgne suggest that you design the pricing before designing for a targeted cost.
There are various methods for the development process from waterfall to scrum and each organisation will choose the most appropriate for their needs.
4. Bring your innovation to market
In this final process the team ramps up from pilot to full commercial production, including supply of materials at required quality. They also launch the marketing and sales process.
If those are the main objectives in the Internal Process dimension, how do these activities relate to the rest of the Strategy Map? The overall Strategy Map will look something like this:
The impact of innovation on your offer
Your Innovation process should be aimed at offering high-performance products in your market. These advantages should follow in quick succession as competition will always follow good ideas. Just ask Apple about Samsung. Getting to market late may cost far more than cost overrun on the production process.
Innovation may also allow you to extend your products and services into new markets. Innovation is expensive and successful organisations apply leading products and services to applications well beyond the initial application. Honda stepped from motorcycles to automobiles. Canon transferred their leadership in optics and electronics from cameras to printers, copiers and medical electronics.
The financial impact of innovation
Your innovation strategy is most likely aimed at revenue growth and enhanced margins. There is also the possibility of reviewing the whole lifecycle of a product to lower the costs, perhaps by designing in a lower cost of maintenance, repair and disposal from the start of the process.
Resource requirements for innovation
Innovation depends on expertise. To develop for technical markets you need deep expertise in the underlying science and technology and also advanced information technology, computational skill and virtual modelling. Information technology is also critical in the project process itself, including Computer Aided Design and Computer Aided Manufacturing.
But technical skills are not enough. Innovation experts also need skills in how to work with other people. And that is not even in teams. The brightest mind, set in a context of misunderstanding, conflict and defensiveness will deliver little value. Innovators, real propeller heads, are often less adept at navigating the political waters of large organisations. In addition to this, innovation processes often receive less management attention than the more visible, repetitive and predictable operating and customer management processes.
Teamwork is also vitally important for innovation. Advances in innovative industries require the integration of people and ideas. The science and technology from various disciplines must be synthesised. The teams within the R&D function must work well together. Teams must also work effectively with people and teams from other disciplines such as Finance, Operations and Marketing if the development projects are to meet their goals for quality, cost and launch date. R&D teams should also have extended networks outside of the organisation and should be actively involved in the scientific and technological community.
The culture of the organisation should also nurture innovation. Fresh ideas are fragile. Senior members may be threatened by talented junior “upstarts”. Without an explicit commitment to managing this anxiety your management team may easily discourage input and hasten the resignation of the very skills you desperately need. For some reason “Not Invented Here” syndrome is hard to identify in our own back yard. Creating this culture may go way beyond a framed statement of desired values. There could be significant work to be done here!
So there is an overview of an innovation strategy summarised as only a Strategy Map can. This is very different from the power strategy described in a previous posting.
