Innovation: How to Build Your Firm’s Capability


7 Building Blocks to accelerate your firm’s ability to identify and deliver innovative solutions to your customers’ needs

 

In every industry, executives are asking themselves:

  • How can innovation support and extend my firm’s strategy?
  • How can I build and manage an innovation portfolio to deliver results?
  • How do I build an innovation ecosystem to surface and realise innovative ideas?

It’s not one thing, but a set of complementary capabilities that gather and amplify the skills and resources within and outside your firm. Here are 7 key building blocks you should incorporate into your firm’s innovation capability.

 

1. Define how innovation serves your strategy.

Innovation’s link to strategy should be set out early. Harvard Business School’s Gary P. Pisano asks key questions to establish this link:

  • How will innovation create value for potential customers?
  • How will the company capture a share of the value its innovations generate?
  • What types of innovations will allow the company to create and capture value, and what resources should each type receive?

In their article “Three Examples of Innovation Strategies”, digital agency Miura contrasts the strategies of three leading tech firms:

  • Apple (Need Seeker): Knowing customers better than themselves, identifying unarticulated needs, and then being the first to market with a product that addresses those needs.
  • Samsung (Market Readers): Looking at innovation and coming up with their own version very rapidly to get their share
  • Google (Tech Drivers): leveraging the technology base, seeing what you can push out, seeing where there might be applications for the technology.

What is your firm’s risk appetite? Not every firm can adopt Facebook’s “Move fast and break things” ethos, so setting “guardrails” defining what is good and what is too risky signals to your organisation where best to focus.

You should also determine how your innovation team should best operate. Will your firm’s innovation needs be best met by forming a Skunkworks (a dedicated team kept separate from the rest of the organisation) or a team of “catalysts” who can evangelise, coach and mentor to enable the organisation as a whole to be more innovative?

 

2. Assemble your Innovation Ecosystem.

To be successful, leadership from the top is critical – not just using the words, but modelling the behaviour. HINT: If even the smallest failure is punished, no-one will step up and suggest (much less try) something new.

In addition to top-level sponsorship, champions within key functions and the engagement of stakeholder, you should seek to harness the creativity, skills and resources beyond your own organisation. A well-known African proverb says:

“If you want to go fast, go alone. If you want to go far, go together.”

 

Partners can include:

  • Other firms with complementary customer product, distribution or supply chain capabilities.
  • Academia and research institutes
  • Technology firms
  • Startups
  • Venture Capital firms
  • Startup accelerators and incubators

 

The composition of your Innovation Group or Centre of Excellence (CoE) should include multiple disciplines, but also be able to draw on the specialist skills of “adjunct” members from across the organization, on a full-time, secondment, or part-time basis. The specific skillset of your core team will depend on the types of innovation you will pursue, but should include at a minimum skills in strategy, sales and marketing, customer services, analytics, technology and operations.

 

3. Build a Balanced Innovation Portfolio.

Much attention is given to the transformational “moon shot” successes such as Google’s search engine, Uber’s ride-sharing platform, and Amazon’s AWS (which emerged from an internal technology infrastructure project to become a key revenue driver for the firm).

But moon-shots are high-risk, high-reward innovations. Many corporate innovation initiatives will be shut down if stakeholders don’t see results in the near-to-medium term. To demonstrate progress, firms should compile a mixed portfolio of revolutionary and incremental innovations that, while pushing the boundaries, are still within reach given the firm’s risk appetite and time horizon.

 

4. Assemble the people, processes and tools.

The key to rapid iterative development is to keep teams small but multi-disciplinary (such as Amazon’s “two-pizza” teams.

Frameworks such as Lean Startup, SCRUM, and others prioritise the principles espoused in the Agile Manifesto:

  • Individuals and interactions over processes and tools
  • Working software over comprehensive documentation
  • Customer collaboration over contract negotiation
  • Responding to change over following a plan

 

Create a sandbox, a safe place for experimentation, and give people the tools and opportunity to use it. More than a simple Development environment, the sandbox should have pre-configured building blocks that allow teams to combine and re-combine resources, data and systems without a steep learning curve.

What is in an Innovation Sandbox?

Key to a multi-purpose sandbox is the use of Application Programming Interfaces (APIs), enabling integration of the firm’s internal systems with partners. The path to building Private, Partner and Public APIs is described in “Open API Roadmap – From Strategy to Execution”.

Open API Roadmap – From Strategy to Execution

Also important is establishing mechanisms for engaging customers and partners in a co-creation process.

 

5. Execute your innovation initiatives.

Now that you have established your innovation function, assembled the team and tools, it’s time to get some runs on the board.

Executing initiatives is where all the prior preparation comes to a head. There are many vehicles for executing, including:

  • Agile projects
  • Experiments
  • Proofs of Concept
  • Pilots
  • Hackathons
  • Innovation Challenges

 

The nature, size, duration and tools employed can very greatly between activities, so flexibility in tailoring to your firm’s circumstances, skills and resources is critical to producing a result.

 

6. Clear a pathway to production.

Without a way of migrating to production, that interesting prototype or Minimum Viable Product (MVP) will remain just that. A true MVP won’t have the robustness, performance, scalability and security required by your enterprise (there’s no such thing as a bullet-proof MVP).

Build a mechanism to go from prototype to production-ready. Start by conducting a gap analysis with your firm’s current product development methodology. Then determine if all those governance criteria and review gates are necessary for every initiative. Most likely your innovation exercise has addressed some requirements, but not others. If you have a very sequential product development process, you will want to avoid sending your prototype all the way back to the start.

The resources picking up prototypes and guiding them through your firm’s change management process for could reside in the project team, or you may want to establish a specialist team within your Innovation CoE to help expedite this.

 

7. Sustain and grow your innovation capability.

Starting small is a great way to get runs on the board, and it’s easier to justify a small budget for a small activity. But the benefits really come when an innovation mindset becomes part of the firm’s DNA.

The Skunkworks model, like Xerox PARC, hiring only the best and brightest to populate the innovation team, and keeping them separate, can lead to breakthrough innovations. The alternative model is to treat the innovation centre as a training ground for the wider organisation, such as DBS’s “22,000 person startup”.

 

Bringing it all together

Building an innovation capability requires skills and resources from across and beyond the firm. The real difference between this and traditional top-down management may only become apparent when industry and business models change. Truly innovative firms will either anticipate changes or adapt quickly to them. Building the ability to do so is now a core component of doing business.

 

Innovation Capability Wheel

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