Common Misconceptions in Strategic Innovation Initiatives

Initiatives to cultivate innovation are rapidly proliferating. From my regular dialogue with Marketing and R&D executives of science/technology-based organizations, I notice many initiatives are built on at least one of these underlying assumptions:

  1. Innovation can be Outsourced
  2. Ideation = Innovation
  3. Technological Novelty = Innovation

Per se, these assumptions are perfectly good starting points – the mistake is to believe that’s all you have to focus on.

A lot of thought and care needs to be put into the application and follow through of these assumptions to achieve sustainable results. Let’s consider each of these assumptions in turn …

(1) Innovation can be Outsourced

Many corporations have been funding collaborations with academia and startups in the hope of giving birth to their next killer product. Typically, the corporate sponsor funds certain research activities, the outputs of which are then imported back for development into a commercial product. There are numerous success stories. But there are at least as many deals that do not deliver. A typical pitfall is the adoption of an arms-length relationship – the sponsor provides funding and the partner conducts research, with little day-to-day interaction and a high risk of both sides getting mis-aligned over time. In other cases, the sponsor does the opposite, imposing its processes/SOPs on how the partner operates. Neither approach is conducive to the cross-stimulation and integration of complementary skills and perspectives which generates the best innovations.

Experienced sponsors (i) use their in-house capabilities to regularly provide what their partner lacks or to enhance what they do, and (ii) assign (as their primary partner interfaces) individuals with collaborative behaviors and openness to different ways of thinking.

(2) Ideation = Innovation

Many initiatives include a “suggestions box”, where anyone can suggest ideas, often with a reward if the idea eventually becomes a project. But good ideas alone are not enough. A typical pitfall is a screening process which is too much driven by NPVs and revenue forecasts, filtering out many ideas for new markets whose upsides cannot be easily quantified. More importantly, rarely does a single idea translate directly into a product. Typically, several related (or even contrasting) ideas are considered, refined and synthesized by a cross-functional team before a viable concept is articulated. And this concept needs further exploration in successive iterations of test-fail-adapt until the product specification is finalized.

In fact, most organizations have more than enough good ideas, whereas many could get better at shaping them into viable concepts and eventually products. There are many different approaches that can be used for this product shaping process, ranging from (i) systematic identification, analysis and testing of assumptions, to (ii) exploratory co-development projects with marquee customers, to (iii) open architecture approaches such as crowdsourcing.

(3) Technological Novelty = Innovation

Technological inventions do not always translate into commercial successes. Yet in many corporate R&D organizations, the culture of publications and patents is deeply embedded. Of course, technological breakthroughs are necessary enablers for many successful products, but there are just as many successful products assembled from existing technologies. What matters is addressing customer pain points and improving the customer experience in a significantly better way.

Organizations that have become smarter at innovation stimulate and prioritize the use of technology (novel or existing) to drive a dramatic improvement in (i) the level of customer benefit delivered, or (ii) the cost of delivering the existing level of customer benefit. They also innovate on usage, exploiting their existing technology platforms in new customer segments, applications and industry sectors.

And platform exploitation can be combined with a clever product shaping process to generate innovations with high market value quickly. For example, Verdande Technology, a software company originally in the Energy sector, has in just 18 months, extended its technology platform into financial services and healthcare through exploratory co-development projects with marquee customers.

This article was first published in the Front End of Innovation Blog