Day: July 26, 2017

The Building Blocks of Innovation

Innovation is not simple to achieve.  Not only is innovation difficult to distinctly define (Costello & Prohaska, 2013), there are numerous, competing frameworks proclaimed as being successful in creating effective innovation practices (Bowonder, Dambal, Kumar, & Shirodkar, 2010).  The litany of successful innovation conceptualizations leaves organizational leadership with little practical guidance in developing credible innovation strategy.  The result is the failure of most organizations in developing successful innovation practices (Rufat-Latre, Muller, & Jones, 2010).

What’s missing is an overarching framework integrating the various definitions of innovation, the different ways to achieve innovation, and the basic components necessary to achieve sustained innovation success.  While many authors have proposed innovation cookbooks purporting recipes for success, what is really needed is an innovation playbook: a set of resources that can be deployed in response to dynamic changes in organizational position and competitive reaction.  Here is an overview of the building blocks providing the foundation of the innovation playbook.

The Elements of Innovation Strategy

Successful innovation relies on the development of knowledge resources, processes, and an organizational commitment to innovation.  Knowledge resources comprise the employees, ecosystem partners, and customers that become the source of innovation ideation and development (Engel & Del-Palacio, 2011; Phelps, 2010; Rothaermel & Hess, 2010; Wilson & Doz, 2011).  In addition to the people necessary to generate innovation, organizations must have the processes to manage the integration of knowledge into the organization, the development of innovative ideas, and the means to manage innovation outcomes (Birkinshaw, Bouquet, & Barsoux, 2010; Rothaermel & Hess, 2010; Wilson & Doz, 2011).  Finally, organizational commitment towards developing knowledge resources, creating appropriate processes, and directing innovation efforts is necessary to create sustained innovation (Brown & Anthony, 2011; Engel & Del-Palacio, 2011; Ramírez, Roodhart, & Manders, 2011; Sandmeier, Morrison, & Gassmann, 2010).  Regardless of the innovation definition, or framework, the people, processes, and culture of the organization are critical requirements for building an innovation strategy.

Knowledge Wanted Here!

Successful innovation depends on the availability of vast, diverse knowledge resources to provide ideation and successful development of innovation.  The depth and breadth of the knowledge encapsulated in the employees, ecosystem partners, and customers of an organization have been linked to positive innovation outcomes (Dell’Era & Verganti, 2010; Kim & Ployhart, 2014; Phelps, 2010; Rothaermel & Hess, 2010; Sandmeier et al., 2010; Wilson & Doz, 2011).  Phelps reported the correlation between the depth and breadth of an organization’s knowledge network and innovation success; organizations with expansive knowledge networks achieved outsized innovative success.  Dell’Era and Verganti found similar correlations with the diversity of design knowledge and innovative success in design-intensive industries.  Sandmeier et al. identified the frequency and diversity of customer involvement in new product development as a catalyst to innovative outcomes.  Regardless of the perspective of innovation success, or the specific knowledge being integrated, successful innovation is consistently correlated with access to expansive knowledge resources through diverse sources.  Only Rothaermel and Hess suggested limits on the benefits of knowledge diversity and density and suggested the need to manage knowledge resources to achieve the greatest net effect.  In short, Rothaermel and Hess proposed the need for processes to identify the best knowledge resources, coordinate the development of innovation, and measure success effectively.

Some Processing Required

Processes for selecting, promoting, and executing innovative ideas are critical to innovative strategy.  Knowledge resources have differing value, and organizations must understand the differences to coordinate innovation effectively (Mahroeian & Forozia, 2012; Wilson & Doz, 2011).  Wilson and Doz identified a continuum of knowledge classifications from explicit to embedded, to existential (or tacit).  Each of these knowledge resources requires unique processes and systems for effective utilization by the organization.  Wilson and Doz also suggested the amount of effort required to utilize knowledge resources was directly proportional to the unique value of the knowledge gained.  Explicit knowledge, which can be easily codified and transferred via virtual communities (VCs) and crowdsourcing solutions, is also more easily acquired by competitors minimizing the unique value (Hammon & Hippner, 2012; Schröder & Hölzle, 2010; Shepherd, 2012).  On the other end of the spectrum, tacit knowledge requires significant effort to understand and experience, but prevents simple duplication (Mahroeian & Forozia, 2012; Wilson & Doz, 2011).  Organizational leaders must understand the use of varying processes appropriate to the knowledge needs of the organization and when to apply them throughout the process.  This knowledge contributes to an organization’s innovation competencies (Šebestová & Rylková, 2011).  Innovation management processes inform the development of these innovative competencies.  Yet, fully developing an organizations knowledge networks requires more than just process, it requires a culture ready to use it.

A Culture of Innovation

Successful innovation also requires an organizational commitment to the innovation process.  Failed innovation attempts are not only likely, that are inevitable (McGrath, 2011).  McGrath proposed developing an organizational approach embracing the inevitability of failure by building processes designed to learn from small failures to avoid large failures; i.e. fail small, fail fast. Proposing the acceptance of failure is a clear example of the import of organizational commitment to innovation and the need for leadership to build a culture that values the innovative process, including the inherent occurance of failure (Rufat-Latre et al., 2010).  Rufat-Latre et al. argued the development of successful innovation efforts was not a simple action, but an iterative process of developing a culture appreciative of, and committed to, developing innovative capabilities.  Organizational leadership is required to support initiatives inviting innovation from outside of the organization, implementing iterative innovation processes embracing failure, developing the organizational capabilities to innovate, and provide guidance on innovative efforts (Brown & Anthony, 2011; Ramírez et al., 2011).  Brown and Anthony, as well as Ramírez et al., highlighted the importance of effective leadership to financially support and direct innovation efforts as strategic and necessary practices within the organization.  Besides direct investment in the process of innovation, leadership is the critical link between organizational strategy and innovation (Bodley-scott, 2011; Ramírez et al., 2011).  Without this connection, innovation will not be directed towards the value that benefits the organization.

Measure for Success

Guiding an organization’s innovative process is a critical factor in developing innovative capabilities.  For innovative organizations, dashboards provide both the ability to gauge successful processes, as well as uncover unique opportunities (Mullins & Komisar, 2011).  Mullins and Komisar suggested dashboards, traditionally used to help keep an organization on track, could help innovators discover opportunities to innovate business processes.  When traditional metrics suggest existing methods are deviating, it could signal changes in the business environment and forewarn of shifts in market dynamics.  These warning signs provide leaders with better means to sense opportunities for capturing value before competitors (Teece, 2012).  At the same time, choosing appropriate measures to manage and measure overall innovation capabilities are also critical to building repeatable innovation practices (Brown & Anthony, 2011; Chen & Muller, 2010).  Chen and Muller presented a general approach to measuring innovation system performance using three primary criteria: innovation contribution to revenue and profit growth, the value of the innovation pipeline, and the quality of the innovation pipeline.  Brown and Anthony documented similar approaches used to increase the proportion of innovative successes.  Fully understanding the health of the innovation process is particularly important as, contrary to general belief, innovation is not stymied by lack of ideas, but an inability to select and promote good ideas (Birkinshaw et al., 2010).  Analyzing the innovation pipeline provides leadership the ability to prioritize innovation efforts, as well as pinpoint where innovation efforts are becoming restrained.

Innovation Building Blocks Summarized

The literature consistently highlights people, process, and organizational commitment as critical factors for successful innovation.  Broad, diverse knowledge resources increase the breadth of innovative solutions available to the organization.  Developing the processes appropriate to identify, integrate, and develop innovative ideas, as well as manage the innovation pipeline promote the development of an organization’s overall innovative capabilities.  Organizational commitment provides the resources, guidance, and culture required to innovate successfully, through the direct engagement of leadership in creating an organization valuing and promoting innovation.  People, processes, and effective innovation leadership constitute the building blocks for innovation strategy.

These building blocks are the foundation of the innovation playbook.



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