COVER WITH IMAGE IN BGENABLING

INNOVATION A designers perspective.

July 2016 @thomas_thinks @frogdesign

THE INNOVATION PROCESS

2

NOW EXPLORE FUTURE

Innovation is the process by which we explore and build the future. Its goal is to build a future which is better than the present.

BUILD

THE INNOVATION PROCESS

3

NOW EXPLORE FUTURE

Innovation requires specific capabilities and behaviours to succeed. It also required enabling environment, which many large organisations fail to provide.

BUILD

Understand your Users Identify problems Explore opportunities Develop Hypotheses

Prototype solutions Test hypotheses Iterate and Learn

Select & Invest

Build solution, market, & organisation in parallel Sustain investment Deal with legacy conflict

Grow the market Normalise the business

INNOVATION IN BUSINESS

4

The basic model for how innovation impacts business is the “S-curve”. By investing time and money now, you make more money in the future.

+ $

- $

time

INNOVATION IN BUSINESS

5

“Innovation” is everything that is not “business as usual”.

+ $

- $

time

Innovation Business as usual

Many companies under-estimate the time and/or cost needed to develop successful innovations. That leads them to starve their innovation pipeline or demand business results too early.

THE INNOVATION PORTFOLIO

6

In a portfolio approach, the profits from mature businesses fuel the investments for the next wave of innovation.

+ $

time

+ $

THE INNOVATION PORTFOLIO

7

This is the basis of the “horizons of growth” model1 which defines 3 different areas of focus for innovation according to the time horizon.

+ $+ $

time (in which value is realized)

HORIZON 1

HORIZON 2

HORIZON 3

Extend & defend core business

Build emerging businesses —

Create viable options —

1 from McKinsey & Company, “3 Horizons of growth”

May modify or disrupt existing business models

May challenge definition of who you are as a company

THE INNOVATION PORTFOLIO

8

An ideal innovation portfolio looks like this.

+ $

time (in which value is realized)

Clusters of horizon 3 initiatives generating insight and foresight around areas of strategic interest

A strong portfolio of horizon 2 initiatives that provide positional advantage

A steady pipeline of horizon 1 initiatives focussing on superior execution.

Increasing senior management

direct involvement

THE INNOVATION PORTFOLIO

9

Too often, real innovation portfolio’s look like this. This pattern is typical of companies that have fallen into the “success trap”2.

+ $

time (in which value is realized)

There are lots of horizon 3 initiatives but they are scattered and lack strategic commitment.

There are too few horizon 2 initiatives, and they are precariously resourced.

Horizon 1 initiatives take up most of the innovation funding, but often fail to deliver ROI.

2see https://hbr.org/2015/11/dont-let-your-company-get-trapped-by-success

Senior management attention almost is entirely on horizon 1.

How do you get out of the success trap? (some hypotheses based on observation)

10

HORIZON 1 THE SELF-INNOVATING ORGANISATION

11

The people doing the day-to-day business of the company are the best-placed to discover horizon 1 innovation opportunities.

How do we unlock that potential?

BLOCKERS

• busy with your day job, no time or budget for innovation

• not empowered or accountable

• no clear path forward for innovative ideas

• lacking specific skills (e.g. user-centered design, business case assessment)

• hard to form interdisciplinary teams due to departmental boundaries

• top-down innovations fail due to lack of adoption

ENABLERS

• devolve accountability for horizon 1 innovation to local P&L entities

• encourage innovation investment from local budget.

• promote local, cross-department initiatives

• process guidance (drawing on lean/agile methodology)

• create a role for “founders” in scale-up of successful initiatives

• expert assistance from centre & preferred partners

• insist on ROI metrics

• focus on demand, not supply

HORIZON 2 LIBERATE GROWTH

12

Horizon 2 innovations are too often starved and hamstrung by the corporate environment.

How do we liberate growth?

BLOCKERS

• insufficient growth capital

• conflicts of interest with legacy business

• slowed down by internal processes that are designed for legacy business

• lack of agility and focus

• shut down because measured on the wrong criteria.

ENABLERS

• finance horizon 2 initiatives generously, from outside existing operating units

• measure success in terms of NPV, not ROIC

• build dedicated, co-located teams with all strategic competences

• allow out-sourcing (even of services that are available internally)

• don't let compatibility with todays business get in the way (you can always sell it)

• be creative with ownership structures (it doesn’t have to be part of the mothership)

HORIZON 3 HAVE A THESIS!

13

Horizon 3 innovations enable us to explore multiple futures.

How do we harness this exploration to build the future we want?

BLOCKERS

• lack of an explicit thesis leads to scattered and/or self-limited explorations

• perceived as “boffins” far from strategic priorities of company

• pressure not to work on the same problems as other teams

• no clear criteria or process to kill an initiative, or to promote it to next level

• learning (i.e. failure) is devalued

• vision and passion are devalued vs. rational/analytical thought

ENABLERS

• highest levels of management must be directly involved in creative process

• set a “north star” that is specific enough to create focus

• encourage multiple teams to explore same problem space

• celebrate learning (i.e. failure)

• emotion is OK! this is the space of champions and visionaries

YOUR INNOVATION PORTFOLIO

14

What does your innovation portfolio look like? What can you do tomorrow to improve its health?

+ $+ $

time (in which value is realized)

HORIZON 1

HORIZON 2

HORIZON 3

Extend & defend core business

Build emerging businesses —

Create viable options —

May modify or disrupt existing business models

May challenge definition of who you are as a company

frog is a company of Aricent. © 2014 frog design inc.