Last week I had the opportunity to work with a firm that is trying to build an innovation capability. It’s a large privately held firm in a highly regulated industry that is undergoing lots and lots of disruption. They know they need to generate new revenue streams, and so, in one division, they appointed a “director of innovation.” Cool! She knows she needs to develop an innovation management system, but isn’t sure where to start. So we got down to business.
It soon became clear that what her leadership thought was innovation was very different than what she thought they should think was innovation (still with me?). I agreed. It’s amazing what people will call innovation. Her leaders were using the term to denote what we once knew as business process re-engineering …the ultimate in continuous improvement. They wanted her to oversee this function in the company. They called it “business model innovation.” Well, there ARE lots of potential business model innovations in her industry (pharmaceuticals and health care). But helping the salesforce implement a new software package is not one of them…and that’s the sort of thing her leadership believed she should do. That’s continuous improvement.
Others believe that patents, or inventions, are innovations. They aren’t. Not until some useful purpose is demonstrated and there’s a link to a need. All the follow-on work to develop that invention into a useful product or service is the part that makes it an innovation. – So, her first step will be to educate her leadership on the definition of innovation. Here’s what we told her:Breakthrough innovations are those with the potential to offer new to the world performance features, OR order of magnitude improvements in known features, OR dramatic reductions in costs. These last two options open up new applications for an offering that may never before have been imagined.
Take, for example, the personal computer. Now that was a breakthrough. But all of the subsequent improvements? Some have been incremental, and some have perhaps been evolutionary. Hybrid vehicles? Breakthroughs. Subsequent generations (like the new one with solar cells in the roof to heat/cool the interior)? Evolutionary. CT scanners? Breakthroughs. Cell Phones???? I Phones?? What other breakthroughs come to mind? There are myriads. One of our recent graduates just sent me an announcement that the start up firm he’s with has a breakthrough. It is the first-ever FAA certified speech recognition system for pilots. It allows the pilot to enter waypoints in 1/10th the time required by the current method. Now that meets the requirement, right? :-). Take a look at this if you want to see a demo. This will allow pilots to operate very differently in cockpits. Could change a lot of things.
But the key issue associated with breakthroughs, and even with evolutionary innovations, especially in the mature established firm, is the uncertainty inherent in them. Because of this uncertainty, managing them is different from managing incremental innovation or continuous improvement. Way different.
Most activities that companies engage in have to do with using what they know in familiar situations. That’s mostly the world of higher degrees of certainty, and implementation is the key. When the world is uncertain, it’s hard to know what the outcome of any action you take will be. That makes managers in companies nervous, because predictability (and therefore control) are not the name of the game. Experimentation and learning are.
It seems that companies who have not focused on developing a management system for innovation have a very difficult time keeping its definition clear. It differs across individuals in the organization. Everyone has a different understanding about what it is.
So step #1 in initiating a capability is to clarify definitions.
When beginning that discussion, ask some of these questions:
1. How many ‘levels’ of innovativeness do we experience in our company, and what should we call them? (Incremental, Evolutionary or platform, and breakthrough? Today, tomorrow and beyond? Horizon 1, Horizon 2 and Horizon 3? There are lots of options for names, but most companies settle on three ‘levels’ of innovativeness).
2. How shall we allocate our resources across those three levels?
3. What do you believe the differences are among them, and what are the management implications regarding each of the following? In other words, how should we handle each of these differently for the three levels of innovativeness?
a. Processes and tools
c. Organizational structure arrangements
d. Governance and leadership
f. Skills and talent development?
If they start to look at you quizzically…..you’ve done your job. You’ve got them thinking. Yowza!