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Monthly Archives: December 2007
The third competency needed to have a full up breakthrough innovation capability is acceleration. Acceleration activities ramp up the fledgling business to a point where it can stand on its own relative to other business platforms in the division that’s eventually going to house the new business.. Whereas incubation reduces market and technical uncertainty through experimentation and learning, acceleration focuses on building a business to a level of some predictability in terms of sales and operations. As one Innovation Director told us:
“I need a landing zone for projects that the business unit does not feel comfortable with. If I transfer these projects too early, the business unit leadership lets them die. I need a place to grow them until they can compete with ongoing businesses in the current operating units for resources and attention.”
The skills needed are those required for managing high growth businesses. Acceleration involves exploitation rather than either exploration (which Discovery requires) or experimentation (which Incubation requires). The activities of acceleration include investing to build the business and its necessary infrastructure, focusing and responding to market leads and opportunities, and beginning to institute repeatable processes for typical business processes such as manufacturing and order delivery, customer contact and support. Acceleration involves turning early customer leads into a set of qualified customers and predictable sales forecasts. Similar to an independent start up firm in first stage growth, acceleration pursues top line revenue rather than bottom line profitability.
Whereas discovery competencies generate or recognize RI opportunities, the incubation competency involves activity that matures radical opportunities into business proposals. A business proposal is a working hypothesis about what the technology or business platform could enable in the market, what the market space will ultimately look like, and what the business model will be. Incubation is not complete until that proposal (or, more likely, a number of proposals, based on the initial discovery) has been tested in the market, with a working prototype, and first revenues are flowing in.
We’ve observed that the skills needed for incubation are experimentation skills. Experiments are conducted not only on the technical front, but, also for market learning, market creation and to test the business proposal’s match with the company’s strategic intent.
In most of the companies we studied, most projects entering into the incubation phase were filtered out when the experiments failed for one reason or another, due to the high uncertainty associated with what initially appeared to be a promising opportunity. One BI portfolio manager described his frustration at the ‘churn’ rate in the portfolio at the early phases of the projects, when they were moving from the idea phase to early technical and market experimentation. Still, he admitted how that was to be expected given the high level of innovativeness, and therefore risk, of the ideas.
It turns out the incubation is the hardest competency to develop and maintain in companies. It takes too long. We don’t train business students how to do it. Certainly not how to evaluate it. We call incubation “The Long and Winding Road.”
When we started studying the companies who have a declared strategic intent to build a breakthrough innovation capability, we saw companies who wanted BI but didn’t have enough good ideas. We saw companies with lots of great ideas that couldn’t get them built into businesses. They’d send them over to the business unit once the technology or concept was developed ‘enough,’ and then nothing happened. They just stalled.
We were asking ourselves, “What is a capability for breakthrough innovation, anyway?”As it turns out, there are three separate and distinct capabilities. How do we know? Because some companies had some, and some companies had others, but only 1 had all three of them. AND even that one didn’t have them tied together very well. We saw projects slip off the radar screen.
We believe that breakthrough innovation is about the three following capabilities: Discovery, Incubation and Acceleration.
The discovery capability involves activities that create, recognize, elaborate, and articulate opportunities for radical innovation. The skills needed are exploratory, conceptualization skills, both in terms of technical, scientific discovery and external hunting for opportunities. Discovery activities can include invention, but needn’t always.
While the vast majority of companies in our study invested in internally focused laboratory research , most also hunted inside and outside the company for ideas and opportunities, and licensed technologies or placed equity investments in small firms that hold promise.
We saw ‘alpha teams’ of idea generators…really creative, smart types who just pumped out idea after idea because they understood the wealth of scientific expertise resident in their company. We saw idea hunters who went out into business units and help workshops and idea jams. We saw “exploratory marketing’ teams within R&D groups. These were pairs (a technical person and a business person) who hunted outside the company,…indeed, across the globe, for opportunities.
One of our companies relied upon an informal network of external contractors to generate and develop wild ideas and inventions. This network was maintained and funded by a senior executive who elected not to bring them within the company for fear that their creativity would be stifled.
Discovery if about idea generation, opportunity recognition and opportunity elaboration. All of it. It’s definitely about R&D, but there’s more to it than that.
We’ll share our thoughts on the capabilities of Incubation and Acceleration in future posts.
Yesterday my colleague Andrew and I (he’s a Strategy Professor, also involved in our research program), spoke with the person in Organizational Development at the company I told you about a few days ago, who’s working to develop career paths for innovators. Turns out he’s taking a different approach now. Says that all rising leaders in the organization should do a development rotation through the innovation group. Then, they should go back to the business units and be promoted up through the traditional ranks.
Interesting, we said (though we did not really find it interesting at all…. more like discouraging). Why not stick with the plan to promote people up through an innovation function? He agrees that innovation is becoming a function, but also noted that the whole company has to understand innovation, so it’s important to have every general manager do a rotation through that group. Then, when they’re vice presidents of Business units, they’ll be better ‘receivers,’ of breakthroughs, even though those opportunities may not ‘fit’ their business units very well.
He’s absolutely right, of course. We all believe the innovation…. breakthrough innovation… is much more likely to succeed in companies whose senior leaders understand it and, indeed, have experienced it.
But he’s also wrong, we believe. How can innovation become a function if there’s no one in that group on a consistent basis? If there’s no recognition of success via promotion? Does that mean we do not believe there’s a set of skills, responsibilities, and activities that are unique to innovation? Specifically, unique to New business Creation…the part that’s beyond what the technical team does? When we posed that question to him, he paused. Well….. yes.
He agreed to speak with us again in six weeks or so,..the time it’s going to take him to get buy in from the senior Vice President of Innovation in that company on his plan for promotion that does not involve promotion through the ranks of innovation.
We’ll see what happens. I’m placing my bets that the plan will be substantially modified. At least I hope so.
Yesterday I got a note out of the blue from a friend at Intel. An innovator…a serial innovator. Ph.d in electrical engineering, MBA sort of guy. Really smart, and guess what? Sort of outspoken. First he was at Kodak, then moved to Intel, and has been involved in multiple projects, but is nearly always frustrated. Here’s what he said:
The project is going well. We have 8 companies on board now, I hired a good team to run it, and a good Board of Directors. We are going live on the 17th of this month. I feel that the innovation part of the work is done, so my work is done. I am looking to depart in second quarter of next year.
Question: Why can’t he be happy where he is? Why does he feel the need to find something new? What is the company missing here?
No career paths for innovators. One project, then another…and that’s fine. But who’s developing him? Coaching him? Asking him how he prefers to be rewarded? Will he ever reach VP level? Director level? Not a chance. Has he built new business platforms for the companies he’s worked for? Absolutely.
Companies say they want these people, but don’t have a clue how to promote them. In fact, high powered innovative people are usually considered pains in the…….
Most of the companies we’ve studied are worried about this problem. One person from a major firm told us “If I want to get promoted to VP, I’m going to have to transfer out of this (New Business Creation) group and into a division. The only way you get promoted here is by overseeing more people and a bigger budget.”
Sadly…that’s just not how breakthrough innovation works. You don’t always need more people and a bigger budget.
Another company we are very familiar with is beginning to get how big a problem this is. They’ve devoted a person in their Organizational Development/HR group to develop career paths for innovation people. Their tossing ideas around about the best way to do this. But they’re working at it.
To me, this is one of the biggest signs that innovation is taking root as a real business function. It’s not going to go away. People like my friend at Intel may finally have a host of opportunities for professional progress.