While the purpose of innovation is “simply” to create business value (simply is in quotes because it’s obviously not so easy to do), the value itself can take many different forms. As we noted above, it can be incremental improvements to existing products, the creation of breakthroughs such as entirely new products and services, cost reductions, efficiency improvements, new business models, new ventures, and countless other forms as well.
The method of creating innovation is to discover, create, and develop ideas, to refine them into useful forms, and to use them to earn profits, increase efficiency, and/or reduce costs. Here we focus on how to do that, the process of innovation.
The trick to making it work is knowing what’s supposed happen inside the funnel.
In the quest for innovation it’s obvious that many ideas at the input stage become a few completed, useful innovations at the output stage, so people readily visualize the innovation process as a funnel: lots of ideas come in the wide end on the left, and a few finished innovations come to market from the narrow end at the right. The trick to making it work is knowing what’s supposed happen inside the funnel.
So naturally you want to start by creating a whole bunch of ideas, right? Actually, no.
Ideas are indeed the seeds of innovation, just as ore taken from the ground is the raw material of steel, or waving fields of wheat provide the raw material for bread. But it takes a lot of work to mine the raw ore and transform it into steel, or to prepare the fields to grow the wheat long before it becomes bread. It’s the same with innovation; we don’t start by collecting raw ideas. Instead, we know that innovation is a core element of our organizations’ strategy, so we have to start the innovation process itself with strategic thinking to assure that the outputs of innovation are fully aligned with our strategic intent.
Step 1 is therefore Strategic Thinking. The innovation process begins with the goal to create strategic advantage in the marketplace, so in this stage we think specifically about how innovation is going to add value to your strategic intents, and we target the areas where innovation has the greatest potential to provide strategic advantage. This was the topic of chapters 1 and 2.
Step 2 is Portfolio Management & Metrics. As we discovered in the chapters 3 and 4, one of the important underlying facts of innovation management is the necessity of failure. We are by definition trying to do something new, and as we proceed on the innovation journey we do not in fact know if we are going to succeed. We have confidence that we’ll succeed eventually, but along the way we know that there will be many wrong turns, and many attempts that will never come to fruition. So we manage innovation portfolios aggressively to balance the inherent risks of the unknown with the targeted rewards of success, and balancing our pursuit of the ideal with the realities of learning, risking, failing in order to ultimately succeed.
Steps 1 and 2 together provide a platform and context for everything that follows, and so they constitute the ‘Input’ stages of the funnel, and so that the activities in Stages 3 – 8 have the best chance to achieve the best results.
Step 3 is Research. An output of Stage 2 is the design of the ideal innovation portfolio, which is what we believe, as of today, is the right mixture of short and long term projects across all four types of innovation. Once we understand the ideal we can compare our current knowledge and discern the gaps. Filling these gaps, then, is the purpose of research. Through research we will master a wide range of unknowns, including emerging technologies, societal change, and customer values, and in the process we will expose significant new opportunities for innovation.
The Four Stages of the Research Cycle
Strategic thinking has clarified for us how the world is changing and what our customers may value, and this stimulates new questions that our research has answered. Research findings provoke a broad range of new ideas across a wide range of internal and external topics. This is the abundant raw material, and it is already and automatically aligned with our strategic intent because it came about as a result of a direct connection between strategy, portfolio design, and research.
Step 4 is Insight. In the course of our explorations, the light bulb occasionally illuminates, and we grasp the very best ways to address a future possibility. Eureka! The innovation and the target and mutually clarified; we understand what the right value proposition is for the right customer.
While many people think of this moment of insight as the beginning of the innovation process, as you can see, in the well managed innovation effort we expect insight to come about as the result of the preceding processes and activities, not at random. Hence, the innovation process described here is specifically contrasted with random idea generation; insight is the result of a dedicated process of examination and development. It doesn’t occur because someone had a good idea in the shower, but because individuals and teams of people were looking diligently and persistently for it.
Step 5 is Innovation Development, the process of design, engineering, prototyping, and testing that results in finished product, service, and business designs. Manufacturing, distribution, branding, marketing, and sales are also designed at this step in an integrated, multi-disciplinary process.
Step 6 is Market Development, the universal business planning process that begins with brand identification and development, continues through the preparation of customers to understand and choose this innovation and leads to rapid sales growth.
Step 7 is Selling, the where the real payoff is achieved. Now we earn the financial return by successfully selling the new products and services. In the case of process improvement innovations directed internally, we now reap the benefit of increased efficiency and productivity.
Managing a process of this scope and complexity is of course a challenge for all organizations, but among the world’s companies we see that there are some that do this extraordinarily well. The knowledge that some do it very well, and that it’s certainly possible to be an exemplary innovative organization that can attain exceptional profits should be a powerful source of motivation to develop and apply your own master plan.
Langdon Morris is a co-founder of InnovationLabs LLC, one of the world’s leading innovation consultancies.
Langdon is also a Contributing Editor and Writer of Innovation Management, Associate Editor of the International Journal of Innovation Science, a member of the Scientific Committee of Business Digest, Paris, and Editor of the Aerospace Technology Working Group Innovation Series.
He is author, co-author, or editor of eight books on innovation and strategy, and a frequent speaker at innovation conferences worldwide. He has lectured at universities on 4 continents.
The Innovation Master Plan: The CEO’s Guide to Innovation is now available at Amazon.com.