(Originally, this was posted a year ago on medium.com. I felt it's still very relevant, despite the world going through different set of drawbacks and tragedies. Some edits)
If we used to think the world was changing fast, now it’s the time to look around and with a deep breath admit… the world we knew so well no longer exists.
The human cost of the pandemic, wars, and resulting tragedies has been live transforming at the personal level to many. But based on the first-hand experience of losing the loved one, we will move on. It's the economic cost what will be more devastating and life-changing for many of us, and for much longer. Yet, humans are so good at healing and adopting. Once we heal, nothing should stop us growing an equally prosperous, and maybe even a bit more equal new reality. But whether by kicking off some sort of a new model for globalisation, or allowing the fourth industrial revolution to take the leaps where we were too nervous about taking them, none of this growth will be possible without innovation.
While corporations are still focusing on preserving core business from COVID and now economic crisis oblivion, corporate leaders would have to be in a gravely shortsighted denial to overlook the power of innovation to drive economic renewal. But for that, innovation cannot be viewed simply as a sideshow, a programme, or a one-off exercise in creativity! So, be honest with yourself. What comes to YOUR mind when you hear the word “innovation”? An army of unruly millennials (sorry guys…;-) A rainbow of post-it notes in an instructor-lead-brainstorming? Or worse still, a luxury accessory for your CEO’s after dinner circuit?
If any of the above ring a bell, I really hope this short post will be your "aha moment" for this week and a kick up your corporate derriere.
There have been lots of polemic on innovation, and it’s probably one of the overused words in the current business-speak. Still, there is only one definition that makes any sense: turning new ideas into sustainably profitable products that add value from your customers’ perspective.
If you look closely, this short sentence gives you a concise innovation recipe. You need new products, customers that value them, and business models that support the delivery of that value sustainability. That’s it! Oh, and you will need a safe and structured environment for this “serendipity” to take place.
And here is the method to make your innovation recipe work. First, you need to work out an INNOVATION THESIS. Similar to an investment thesis that each VC will have in place before spending a penny on a shiny new startup, you should be very clear of what’s your company’s view of the future and what strategic objective your innovation efforts should deliver. For example, if you take the stance that remote working is where the future growth is, you should be investing only in ideas delivering that future. Just think of your innovation thesis as rail guards, and whatever “awesome” ideas your team might be coming up with, always check them against your innovation thesis.
Next, collect all your future-delivering ideas alongside the core products and services in an INNOVATION PORTFOLIO . The idea behind this portfolio is to have visibility of different stages of all products and business models over time, maturity, and markets. In other words, categorise them by their ability to serve your existing markets, the adjacent markets, i.e. the ones you should be able to venture into by repurposing some of your current capabilities, and new markets with brand new products.
Obviously, no portfolio or roadmap makes sense without a delivery timeline, but I like to go a little deeper and plot a portfolio across the three strategic horizons. More about the horizons framework in a future post, but in the meantime, watch this great short video from the Growth Tribe.
The next ingredient is a FRAMEWORK for managing your innovation portfolio. Executing it is how your company will become an ambidextrous organisation, i.e. the one that is excellent in managing existing successful products, while devoting enough energy and resources to exploring future viability. More about it in my previous post.
There are several innovation frameworks for you to choose from. They all will take you through several shared steps of capturing product ideas, testing them with the customers, and then scaling. In my opinion, the most straightforward explanation and with plenty of practical examples, you will find in Lean Product Lifecycle. And the one I’d like to play with one day is Kickbox originated in Adobe. Also check out Ash Maurya’s Running Lean, or just Google, and you will get plenty of useful resources to get you started, like this one from the InnovationManagement.se. Alternatively, schedule a 15 minutes free call with me to discuss how we design a framework specifically to your needs.
Now you have the framework, you are almost ready to hit the innovative ground running! But not before you agree how you are going to measure success. At this stage, you will have to befriend your CFO and “take him on a journey” as you won’t talk to him about ROI (return on investment) and ARR (account rate of return). These are good for assessing existing products, but pretty meaningless for new innovative ideas. So before your CFO can shout “where is your validated business model?!”, you will talk to him about Incremental Investing instead. And just as startups investing follows stages, so will your product have to reiterate between “hoops”, before receiving funding. The “hoops” are your innovation KPIs. For that, if you can’t wait to see my future posts, I’d like to refer you to The Corporate Startup’s chapter on Innovation Accounting…and Google search. And if you decide to persevere with the traditional financial metrics be warned, they could destroy your capability to truly innovate. If you insist on using them, you will simply be in danger of investing into the same products your business has worked on for a while, or worse, developing products based on numbers pulled out of a hat just to make your decision-makers happy.
So after gathering all the ingredients from the innovation recipe, and getting your head around the method, at last, you are ready to kick off your innovation practice! Just make sure you don’t start developing any new products before testing their attractiveness with the customers AND potential profitability of their business models. But you knew that, right? And really deep down, you knew that to do innovation properly, it’s so much bigger and complex than a “programme” that your boss keeps talking about…
Schedule a 15mins free call with me to start brainstorming your innovation challenges.
All the best,
@AnnieK
** Three Horizons picture; source: HBR “Managing Your Innovation Portfolio”