Calculating the value of an innovation
One of our early objectives was to easily describe the value of our work. It is not easy as Innovation has so many moving parts and the fact that enterprises around the world are feverishly trying to find better ways to achieve groundbreaking innovation and not just improvement is a testimony for its complexity. We tried to distill our value contribution down to neuro ideation, innovation opportunity discovery, innovation-to-market method, innovation financing, reporting, Innovation KPI framework, multi-user digital canvas technology, genetic computing technology AI usage, and a few other things. One aspect recently rose very prominently in conversations with users and customers: a very close relationship between brilliant ideation and relentless execution. However, there was an inner conflict: It is described in a blog post written a few years ago: The Initial value of an idea is zero. How could something of no value sparked multi-billion dollar businesses and disrupts entire industries if it has no value? It just needed to turn on of course but what value is it then? It reminded me of something I learned in quantum mechanics, that I quantum state can be seen as having two states at the same time. Every idea can too. As we learned from neuroscience, an idea is a clearly defined “object in our brain that is composed of past experiences”. The trick is to use it or not. Unused its value is zero and used its value turns into one. The value of one is still not a lot but multiplied with execution that leads to exponential growth makes the one incredibly valuable. Let’s not get deeper into quantum physics as it is just an analogy but look how this concept changes our understanding of innovation.
The two key aspects, that make or break groundbreaking innovation:
- Finding a brilliant idea that leads to innovation
- Making the idea a reality and bringing it to market with relentless execution
Harnessing the duality of ideation and execution is where BlueCallom makes the biggest difference. Moreover developing the BlueCallom Equation, paved the way for making innovation predictable, creating Innovation Forecasts, calculating an Innovation Lifetime Value, and an Innovation ROI. Groundbreaking Innovation (G) = Ideation (I) * Execution(E)².
G = I * E²
The meaning of G
For the development of innovation processes, we needed to make a statement of what we understand by the term INNOVATION, in particular groundbreaking or disruptive innovation is not Improvement. It became even more important when trying to find a way to calculate an innovation value. There are hundreds of different definitions of what innovation means. The following definition is made to make our methods and technology clear, and also what our equation is addressing.
Innovation is the introduction of a
groundbreaking elevation in the way
people do things and ensuring
a successful global distribution.
It often results in disruption, how
industry segments conduct business.
Innovation is not the same as Improvement. For more clarity, we use Groundbreaking Innovation (G)
The creation of I
To get to groundbreaking innovation you need an amazing idea. And since we know, thanks to neuroscience, how innovative ideas get created, we can go one major step further: Making the innovation a reality. Not only by building a prototype but bringing that innovation to life in global markets. Some years ago I wrote a provocative blog post: “The initial Value of an Idea is ZERO” and that has not changed. There have been many known cases where people bought an idea for $1. With that payment, the idea had legally changed ownership. So we can assume that the buy-in of a team developing such an idea has the value of one – assume any currency. The idea is the must-have ignition to innovation, yet has no big value to anybody – yet. The value is created through execution. Every startup knows – it gets embossed in their neurons by every investor. And there is an important effect to be observed: Any successful innovation – ever created – was following an exponential growth rate. Hence the E². But with no execution: 1 * 0 = 0 – in other words, the lack of execution makes the innovation value zero.
The significance of E²
- Innovation Timeline
Innovative solutions take quite a while to get accepted in the market. And there is no shortcut. The larger part of the market participants is rather careful and conservative. It took a few years until the name Tesla even made it to News. It took even longer until Amazon became a household brand. The first two years, Computer 2000 and TechData had a tough start. But 10 years later both bypassed 8,000 competitors which never understood the level of disruption our business models had. Today the merged and combined company is doing nearly 40 Billion in revenue. The inflection point when the so-called “Hockey Stick” kicks in and turns the slow start is recognized as part of an exponential growth curve, it is too late for many companies to seriously compete.
- Innovation Management
Managing an “Innovation to Market” process is an ART and a SCIENCE. One of the key aspects of the science part is the understanding that innovative products will never be purchased by conservative customers, which is the largest audience. One of the arts to get it to scalable results is to know when the broader audience is ready to engage. Today the function of “Innovation Management” is widely underestimated or even completely misunderstood. Innovation management could also be called “Innovation Value Management”. It is all about creating value from a disruptive innovation that has usually the DNA of a unicorn – no matter whether it is a corporate or startup unicorn.
* An idea, as a result of any kind of ideation, has a fixed initial value of zero.
* Once a team is intending to use the idea and make it a reality, the value of such an idea becomes one (1).
* As soon as the innovation is given to users and they see a value for them and start using the product, the value increases above 1. Here it can potentially grow exponentially based on the energy somebody puts into execution. The energy that is put into execution should become proportional to the value growth of the innovation if the execution is done right.
This also explains why some of the innovative products are perceived as “Overhyped” in the eyes of normal observers. Only after carefully analyzing the innovation’s growth path and rate, capital markets react and may look unrealistic. This was experienced with almost every Silicon Valley IPO and afterward, those technological advances became the new normal and ever more often dominating entire markets. The E² in the BlueCallom Equation can now also explain that behavior of seemingly hyped values that turned out to be valuable over time. The BlueCallom Equation is represented in the BlueCallom Deep Innovation Design model as well as in the architecture of the BlueCallom Innovation Management Software (code name ‘deep’).
Debunking 100+ Innovation Methods
G=I E² is more than just a formula for groundbreaking innovation, describing the duality between ideation and execution. It is describing the foundation of any successful innovation effort or process.
- Innovation Team Structure
Brilliant innovation and relentless execution is not a job that a person can do on the side. It’s the opposite – innovation development is one of the most demanding engagements in any business anywhere in the world. The equation also makes clear what the innovation management’s responsibility is.
- Execution – Execution – Execution
It demonstrates the value relation between the idea itself and the execution process after the idea was created. It’s all about execution and that has never been even a consideration in innovation management.
- Time is of essence
It shows the importance of the factor time in the execution from zero to the max. In conventional innovation playgrounds, teams had infinite time. The outcome was zero. Unicorns ran like crazy and that made a huge difference.
- Innovation KPIs
How innovation teams achieve probability calculations, ROI, etc. to develop more robust innovation plans. Only robust KPIs can indicate performance. The number of idea contributions, the value of the contribution, market validation, innovation confluence data, timelines, budgets, degree of disruption, adoption rates, growth pattern, and more. The number of projects can’t be one of them.
- The end of Innovation Kindergarten
The equations expose why empirical experimentation, pivoting, random brainstorming, and other “exercises” just could never lead to groundbreaking innovation. Lego games and dancing, meditation, and other relaxation is really nice – but cannot be the core of the top job of any industry leader.