While the purpose of innovation is to create business value, the value itself can take many different forms, including incremental improvements to existing products, breakthroughs such as new products and services, cost reductions, efficiency improvements, new business models and new ventures. The process used innovate 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.
The innovation process is similar to a funnel, with many ideas at the input stage that get whittled down to a few completed, useful innovations at the output stage. The trick to making it work is knowing what’s supposed happen inside the funnel. Does this mean you should start by creating a lot of ideas? No.
Ideas are 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. Innovation is a similar story: we don’t start by collecting raw ideas. Instead, we must start the innovation process itself with strategic thinking to assure that the outputs of innovation are fully aligned with our organization’s strategic intent.
When you consider innovation in this context, step 1 is actually not ideation but strategic thinking. The process begins with the goal to create strategic advantage in the marketplace. During this stage, you need to think specifically about how innovation is going to add value to your strategic intents, and you must target the areas where innovation has the greatest potential to provide strategic advantage.
Step 2 is portfolio management and metrics. 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 know if we are going to succeed. We have confidence that we’ll do so 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. We balance our pursuit of the ideal with the realities of learning, risking and failing in order to ultimately succeed.
Steps 1 and 2 together provide a platform and context for everything that follows. That’s why they constitute the input stages of the funnel. They need to be effective so that later stages of the innovation process have the best chance to achieve excellent results.
Step 3 is research. An output of stage 2 is the design of the ideal innovation portfolio, which is what we believe 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 is the purpose of research. Through research, we will master a wide range of unknowns, including emerging technologies, societal change and customer values. In the process we will expose significant new opportunities for innovation.
Strategic thinking helps us clarify how the world is changing and what our customers may value. This stimulates new questions that our research has answered. Research findings provoke a broad range of new ideas across a variety of internal and external topics. This is the abundant raw material, and it is already 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. During our explorations, the light bulb occasionally illuminates, and we grasp the very best ways to address a future possibility. The innovation and the target are mutually clarified; we understand what the right value proposition is for the right customer.
Most people may think of this moment of insight as the beginning of the innovation process. But as we’ve seen, if we take a more strategic approach to it, insight is it’s not the first step. 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 a finished product, service or business design. Manufacturing, distribution, branding, marketing and sales are also designed at this step in an integrated, multi-disciplinary process – much more efficient than the usual “toss it over the wall” process traditionally used by many companies.
Step 6 is market development, the 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 a 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. That ought to motivate you to develop and apply your own master innovation plan that is based upon a proven, strategically-focused framework.
By Langdon Morris
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.