Slide thumbnailInnovation principles - universally applicableInnovation Framework

Overview

1 Executive Commitment
2 Innovation Origin Model
3 Innovation Definition
4 Innovation Budgeting
5 Neuro Influence
6 Innovation Teams
7 Innovation Culture
8 Markets
9 Execution
10 Metrics

Independent of various methods, team assembly, and organizational structures, we identified several principles that can be considered essential principles for any corporate innovation initiative. Doing the counterfactual, we can say:

  1. EXECUTIVE COMMITMENT
    Innovation teams play in a vacuum with almost no chance of being successful. Billions have been invested, but genuine innovations have yet to be created.
  2. INNOVATION ORIGIN
    Innovations with impact and exceptional economic success have always originated from a big problem somebody solved – never from random ideas.
  3. INNOVATION DEFINITION
    In general Innovation is a solution that elevates hoe people or organizations do thongs that have not been possible before. Inventions or Improvements are no Innovation.
  4. INNOVATION BUDGETING
    Innovation budgets are investments into the future of the corporation. R&D money is spent on maintaining existing solutions. Mixing both is a terrible mistake.
  5. NEURO INNOVATION
    Knowing how the brain composes complex breakthrough ideas is the key to intelligent and manageable innovation development.  Without that knowledge, you are doomed to experimentation.
  6. TEAM
    With the new depth of understanding of innovation, it becomes apparent what skills a team needs to have to succeed. It may come as a surprise that the key drivers are eight specific cognitive abilities.
  7. CULTURE
    It’s important to understand that corporate cultures are partly built on the trust that optimized business processes are followed to be successful. Innovation culture is asking to question everything.
  8. MARKET DYNAMICS
    From start to global recognition is usually a long way of seven and more years of relentless execution. The timing needs to be accepted because it is dictated by the larger group of market players, which are very conservative.
  9. EXECUTION
    Every successful innovation was thought through, from a vision to a detailed execution plan. Instead of a step-by-step thinking a holistic approach is mandatory to be successful. The primary success factor remains to be relentless execution.
  10. METRICS
    With a robust understanding of the innovation principles, methods for strategy and execution, and a well-thought-out organization model, innovation process-specific data can be defined and success relevant KPIs created that was not possible before.

1) Executive Commitment

Six major features.

Unlike a startup, where entrepreneurs can follow their own interests, corporations have interests that emerge from their long-term strategy, vision and directions, shareholder interests, and, most importantly, customer interests. Unlike a startup with no customers and must go through a painful market development process, corporations have a vast customer base and a huge potential to solve their customer’s biggest problems.

Only top executives know:

1 DIRECTION

  • In what area should the company innovate and why? 
  • What markets or which future markets may be attractive?
  • What types of innovation should the company consider?
  • What aspects of the Overall Corporate Strategy can be augmented through innovation? 

2 EXPECTATION

  1. How much revenue from dying technologies or markets must be replaced?
  2. What incremental revenue from new technologies or markets should be envisioned?
  3. What other goals, such as societal expectations, environmental protection, and sustainability, should be taken care of?

3 GROWTH PROTECTION

  1. What is the budget size that should be allocated for the company’s future (innovation) versus the continuous improvement of existing offerings (R&D)?
  2. How will we protect innovation development over time against short-term cost-cutting measures?

4 INNOVATION STRATEGY

  1. What will the corporate innovation strategy look like?
  2. What goals, markets, functions, etc., should we address?
  3. What corporate constraints should be considered when innovating?
  4. How should an innovation project strategy look like?

5 EXECUTIVE MANDATE

  1. What is the general reason to innovate, and what are the revenue goals?
  2. What is the Relevance, Scope, and Magnitude of any innovation effort, considering there are many innovation engagements in different business units and countries?

6 EMPOWERMENT

  1. What qualities are needed to run a corporate-wide innovation engagement?
  2. Who should be responsible and report to the CEO?
  3. What should qualifications and abilities be expected from the Chief Innovation Officer?

Without that orientation, innovation teams would work in a vacuum, creating random ideas and products but the new relevant impact that accelerates the corporation into the innovation space. Without an executive commitment to innovation, improving the existing product will always have priority, and the distance to being innovative will grow. Without executive commitment, innovation budgets will always be a pittance with no chance to create genuine innovation. Before even asking for any kind of commitment, the executive bench needs to know how innovation is created, measured, validated, and managed to have the level of success the corporation needs. That knowledge can be acquired easily in a one-day executive workshop. Without it, Innovation remains a myth and unintelligent try-and-error engagement.

No. 1 of the general innovation principles for successful Corporate Innovation is a C-Level commitment based on understanding how innovation is created and how they want to apply that knowledge.

2) Innovation Origin

Two major features

Where do those breakthrough solutions come from?

There are two ways to get inspired for innovation:
1) Looking for unsolved problems and
2) Looking for ideas, trends, or what others do


1) While looking for unsolved problems seems to be much harder, it is the only meaningful way to get to genuine innovation. Already at first evaluation of a concept, a well-known unsolved problem can be assessed; it is easier to find the market size for a solution, it can be easily verified, it can be better addressed, and so forth. Most importantly, the solution-to-market path is far easier to understand and forecast.
2) Ideas are plentifully available; finding out if there is a market is very hard. Researching the market size, the unmet needs, and so forth is extremely hard and expensive. Judging whether an idea can be successful in the sense of corporate needs is nearly impossible. As a result, millions are spent on idea hunting and trend spotting, but yet success needs to be seen.

The success story of homo Sapiens gravitates around its ability to solve problems very fast by assessing situations, thinking through options and making intelligent decisions. With the insights of modern neuroscience and the research result of hundreds of successful startups, we all have to realize that looking for ideas is a terrible starting point. All successful breakthrough innovations have originated from large problems that a few people assessed, intelligently thought through options and decided to solve the respective problem.

1 UNSOLVED PROBLEMS
It’s wise to look for unsolved problems in the market you already address. It has been the origin of Innovation in the past hundred years.

2 IDEA HUNTING
Idea hunting has the least potential for Innovation. Moreover it is the hardest to validate if there is a market, if so – how big, if big enough is it worth doing and so forth.

The natural tendency of an enterprise is to look for the way of least resistance in everything they do. But that never leads to innovation. There is a strategic decision to make to look for problems that nobody has solved yet. Another shortcut that is often seen in this area is to buy startups and get innovation done that way. Here the problem is that top startups don’t work for the money but for the bold vision and are not open to sell. All others don’t trust in their abilities and happily sell their company to corporations – but that is a predictable failure. The Origin of an innovation needs to come from the company’s brains.

No. 2 of the general innovation principles for successful Corporate Innovation is understanding that almost all breakthrough innovations originated from known and unsolved problems.

3) Definition

Three major features

Clearly define what you mean with innovation.

Given the specific challenges in Innovation, and the many  different, sometimes even conflicting definitions, we decided to form a definition for genuine innovation to put our work in perspective.

Genuine Innovation is a breakthrough that elevates

people and organizations in the way they do things

that were impossible before

Improvements or inventions are no innovation.

FOUR INNOVATION TYPES
With that definition, we also see a need to define INNOVATION TYPES. The four innovation types that need at least partly different points of view: Product Innovation, business model innovation, Experience Innovation, and organizational innovation. 

INNOVATION MUTATION
Also, we need to be clear about INNOVATION MUTATIONS like incremental innovation. To please those organizations that did not get to any genuine innovation, the term incremental innovation was coined, putting improvements into the category of an “innovation” despite the fact that they do not meet the definition of genuine innovation.


Only with a clear definition of innovation
– can executives articulate what they need
– can innovation teams think of ideas, and solutions
– can milestones, timelines and budgets be created
and can innovation projects be managed.


No. 3 of the general innovation principles for successful Corporate Innovation is to clearly define innovation so that everybody involved knows what it means relative to the expected jobs and tasks.

4) Budgeting

Two major features

Where will you invest time, money, and resources 

1 BUDGET DEMARCATION
Separating the R&D and Innovation budgets is paramount for healthy innovation development. The R&D budget continues to keep your existing solutions competitive in your market. The Innovation budget is the investment into your company’s future to stay relevant.

R&D Budget

Your R&D budget is clearly used to further develop your current products and stay competitive. There should be no doubt that this is a strategic focus of your development team, no matter what industry you are in. In great companies the outcome is stunning new features and exciting product improvements that make customers happy. The average budgets range between 5% and 25% depending on the industry. Now – it was always meant to also create innovative solutions – yet it never did, for a reason.

Innovation Budget

Your Innovation budget on the other hand is the investment in your company’s future. Innovations take more time (Innovation Market Dynamics), take very different teams (cognitive abilities) at start, it addresses initially a highly selective audience (early adopters), it requires a very different development method (Innovation Methodology) and a very different approach (Innovation Framework). All those differences require different leadership and different budget structures.

The biggest difference in the two budgets is their life time development. Initially an Innovation Budget is negligibly small. With the business growth it will grow but also return some of the initial investment. Reinvestment for growth however will be needed. That ‘investment’ however, which is financing growth is not ‘investing’ in growth. Growth financing is a different financial process. A meaningful initial innovation budget of 1% is enough and industry-independent. Once the first milestone, market validation is achieved, a staged innovation budget with corresponding milestones are appropriate. Due to its very different structures and scale, mixing R&D and Innovation budgets in one budget will fail with 100% certainty.

2 PROCESS DIFFERENCES
The two processes, Innovation and Improvement, as explained above, are too different to put it in one pot. Also budget purposes are too different to not give it the respectie attention individually.

No. 4 of the general innovation principles for successful Corporate Innovation is that innovations are unique and very different projects and need staged budgets in accordance to its objective and expected outcome.

5) Neuroscience

Three major features

Where is the magic coming from?

Today, we know that every idea, solution, concept, and strategy, is exclusively coming from the brain. We just didn’t know how it’s done.

Modern neuroscience discovered that ideas are composed by combining past experiences into an imaginary new experience. Doing so with a team of multiple brains accelerates and widens the solution-finding process. Understanding that ideas do not come accidentally makes ideation suddenly a manageable and predictable process. That fundamental change makes innovation management possible.

No. 5 of the general innovation principles for successful Corporate Innovation is to accept that ideas, solutions, concepts are exclusively created in our brain and knowing how to stimulate it and the attempt to manage the brain’s behavior significantly increases success and predictability. 

6) Team

Four major features

Team Composition

6.1 Cognitive Ability
6.2 Background Diversity
6.3 Motivation & Compensation
6.4 Attraction and Hiring

[read more]

No. 6 of the general innovation principles for successful Corporate Innovation is  to assemble a team that comes from very diverse business backgrounds, e.g. Sales, Finance, Engineering… and has innovation specific cognitive abilities e.g. Curiosity, Courage, Creativity and eight other abilities. Meritocracy and motivation are critical considerations to keep the team moving.

7) Culture

Eight major features

Innovation Culture

7.1 C-Level involvement, embracing impact and value
7.2 Team composition as a factor of culture
7.3 Ownership as the king class of rewards
7.4 Recognizing the competitiveness of innovation and
how it affects the team culture
7.5 Creating a performance culture
7.6 Removing any bureaucratic hurdles through culture
7.7 Embracing a co-idea culture of ideation-confluence
7.8 Inducing the innovation culture into stakeholders

[read more]

No. 7 of the general innovation principles for successful Corporate Innovation is to build an innovation culture that amplifies the ingenuity of the team and empowers them to do their job in accordance to the overall requirements. 

8) Markets

Four major features

Innovation Market Dynamics

8.1 Customer Involvement
8.2 Partner Involvement
8.3 Open Innovation
8.4 Innovation Diffusion
8.5 Crossing the chasm
8.6 Market flow

[read more]

No. 8 of the general innovation principles for successful Corporate Innovation is that the market for the innovation expands and changes radically over time. A team and executives who are not aware of it will fail with a very high probability.

9) Execution

Four major features

Never look only at one step; see the entire Innovation Journey.

9.1 Holistic approach
Due to its complexity, timeline, and significance, Innovation needs to be looked at as a whole. The conventional step-by-step operation, where one starts and then sees what the outcome may be before even thinking about the next steps, must lead to failure. When a disruptive solution is in development, strategic features, level of disruption, production, aspects of scaling, global distribution, and financing must be considered. 

9.2 End-to-End Innovation Journey view
The Duality of ideation and execution shows that the value of an innovation is growing with its distribution over time – while the value of the idea is not growing over time – it is actually declining, slowly and steadily.
With that in mind, Innovation-to-Market must be a mission-critical part of the innovation effort. At the same time, there is a substantial risk for organizations to exhaust themselves. Main mistakes, if it doesn’t go fast enough: Pump enormous advertising into the go-to-market effort, yet it doesn’t make a difference because early adopters are not impressed by promotions. Another risk is to invest more in high-powered experts to provide more features and functions, more services, etc. Yet the only outcome is more confusion and less attraction.

9.3 Innovation Journey Phases
In each phase of the journey the innovation team grows more and more on the sales and marketing side.
In phase I, the big focus is on creating the innovative solution.
In phase II the focus shifts towards building the solution while the growing sales teams brings it to market. This is a process that needs the full attention of the entire team. If the team is not well selected it can break the innovation success. Also it is the phase where in the past innovative solutions were given to the existing organization and failed for many reasons.
In phase III, the team focuses on exponential growth and scaling. It’s the time when the new production line must hold for enormous growth rates, personnel growth will be excessive and the group is on its way to a market-leading position.
That’s why exponential growth is important and has its own laws and dynamics. We reduced the key values to the max to get the best possible success: Silicon Valley Startups get pushed to grow exponentially to ensure success. G = I * E² “. Genuine innovation (G) is the value of the idea (I) with a value of 1 multiplied by the exponential growth execution (E²).

9.4 Innovation Journey Management

Throughout the entire process the innovation team will grow in size, in intellectual capacity. That is a unique load on the innovation management. It is also the reason why the team assembly in the first step is so critical and requires that focus on cognitive abilities. Replacing team members underway would be a terrible loss as too much know how gets lost.

No. 9 of the general innovation principles for successful Corporate Innovation, is to look at the entire innovation journey as a whole and harness the duality of ideation and execution.

10) Metrics

Seven major features

Innovation-Specific Metrics

In the past innovation was considered an act of luck and hope. It wabn’t clear whether the team will have the right ideas. Once ideas looked compelling, it wasn’t clear if those ideas could be realized. There were far too many variables and almost no constant or fact that would warrant to build KPIs for the act of innovation. That has changed fundamentally.

  1. Episode-related performance
    Innovation is a journey through very different, yet connected activities we call episodes. There are many tasks and activities such as research, market feedback, market engagement and team activities that can be measured.
  2. Innovation Task-specific performance data
    Within each episode are multiple tasks with again countless activities that can be measured and KPI values can be given. This helps to analyze innovation task specific data and comparisons.
  3. Team-specific performance data
    Since innovation is a team work, team activities, contribution and engagement can easily be measured and analyzed during the process.
  4. Innovation timeline management
    Obviously time consumption through the entire journey can be measured, analyzed and compared with other teams.
  5. Innovation Budget Management
    Innovation budget consumption is not exactly a innovation relevant performance indicator but an overall datapoint that helps operational performance to be compared between teams.
  6. Innovation ROI calculation
    and last but for sure not least the ROI calculation. The time when the money invested has been returned.
  7. Innovation Success Predictability
    Even though it is a bit more complex to predict the success of an innovation compared to the success of a large key account deal, there are ways to get there. This should definitely be on the CFO’s radar and is part of the Innovation Principles to have one in place.

Obviously there is a lot of room for more. In BlueCallom DEEP, our Innovation Management Platform, we track approximately 20,000 datapoints and feed an intelligent KPI framework with 300 performance indicators that allows eventually to get to an ISI (Innovation Success Indicator), Using a predictive model, the ISI becomes the “Mother of all Innovation KPIs” and is one of the most powerful results for the CFO when using an Innovation Framework and corresponding technology.  [read more]

No. 10 of the general innovation principles for successful Corporate Innovation is to build a innovation success relevant performance indicator set allowing teams and management navigating the multi-year process to success.


RESOURCES

WHITE PAPER

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