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Three Ways To Strengthen Your Firm’s Innovation Capacity

Allow for rapid trial and error

13Mar

Do you have the impression that your firm could be much more innovative than it is today? If so, you are not alone. At a recent innovation workshop, several of the attendees (including many employees from smaller companies) complained that they would like to innovate, but feel that their firms’ efforts to do so are unremarkable. It turns out that even smaller firms, which we imagine to be more flexible and agile, get caught up in patterns where they look to a relatively narrow range of innovation opportunities, and ignore many others.

The firms that complained about their limited ability to innovate looked mainly to their existing products as innovation leverage points. Because a considerable number of these firms were technology-based, they saw missing technologies (know-how and machinery) and funding requirements as innovation hurdles that must be cleared. Thus, many of them came to the conclusion that the current economic environment was inhibiting innovation. If that were the case, we might expect to see larger, better resourced organizations outpacing their smaller rivals with innovation during tough economic times. But that is not the case; large and small firms alike struggle to make innovation happen regardless of the economic climate.

What these firms do have in common is a tendency to apply too narrow a perspective on innovation, which self-limits their opportunity space. Organizations that want to stay ahead of their competition through innovation can strengthen their capacity to innovate by opening this space up more broadly. This is especially important in times when the economic environment is changing quickly and the western world has to look for new ways to create value and wealth in their economies. Three basic strategies can widen any organization’s innovation opportunity space:

  1. Exploit innovation at all levels. The first way your company can strengthen its innovation capacity is to look in different places for innovations that can set you apart from the competition. Look beyond your products and services to your processes and even your entire business model for innovation opportunities. For example, reviewing the nine business model canvas described by Osterwalder and Pigneur (e.g. Value Proposition, Customer Relationships Channels, Customer Segments, Revenue Streams, etc.) every single one of them suggests opportunities for your firm to operate differently. Many companies stop at products and services and do not think about these additional innovation dimensions.
  2. Explore new alliances and leverage convergence. A second way to broaden your firm’s innovation opportunity space is to look beyond your business focus area for new partners who have capabilities that can help you create new products or services, adapt your processes, or adjust your business model. By combining formerly separate technologies or know-how, entirely new opportunities can emerge. One of the most obvious examples is the smartphone. In a smartphone, we have a combination of several formerly separate devices, including a mobile phone, camera, video recorder, voice recorder, music player, and what used to be a PDA. What worked in the ICT industry also happens more and more frequently in other industries as well. This is also something that can be explored by smaller firms and larger corporations equally. One of the consequences is that we will see more firms entering industries in which they did not compete before (e.g., Samsung becoming a player in the LED lighting industry – the know-how came from TVs), or we will see completely new partnerships from firms or organizations that never worked together before (e.g., app developers cooperating with a manufacturer of building appliances to create integrated solutions to control the building climate).
  3. Take a proactive and disciplined approach to innovation. The third way to strengthen your firm’s innovation capacity was described years ago by Peter F. Drucker in his 1998 article: 'The Discipline of Innovation'. The core of this idea is that innovation does not happen by chance, nor is it based on the ideas of some lonely genius working in a vacuum. Instead, it requires disciplined, conscious, and continuous exploration through hard work. So, if you want to create competitive advantage through innovation you must help your firm a) continually look for opportunities to innovate in different sources (variety is key), and b) explore promising ideas in a structured trial and error process.

    Firm-sponsored innovation requires a high level framework that helps innovators cover all important elements of product development and proof of concept. The most innovative firms allow for rapid trial and error that allows good ideas to fail fast – or to quickly develop into commercially valuable opportunities. The development and testing process cannot be too rigid; the goal is to allow the firm to quickly confirm good concepts – and drop ideas that are not so good. Although this trial and error process is hard work and requires discipline, it provides speed and competitive advantage when opportunities do arise.

Although smaller firms might seem to have an innovation advantage, they are constrained by the same assumption set that exists in their larger peers. All firms can expand their innovation opportunity spaces by looking beyond products and services, opening their borders to innovation partners, and applying a disciplined, rapid approach to innovation development.

So, how does your firm innovate and do you have additional recommendations to strengthen the innovation capacity?

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