Innovation is critical to creating and maintaining a competitive advantage in the modern business environment. Organizational leaders must find ways to combine undifferentiated resources to create differentiated products and services (Lawson & Samson, 2001; Teece, 2011, 2012). These dynamic capabilities require constant innovation to create new value for the organization as well as the organization’s customers. Innovation is the driver of delivering sustained competitive advantage.
Innovation is not a simple construct. Innovation means multiple things depending on the context (Costello & Prohaska, 2013). Also, numerous, competing models have shown to be capable of creating successful innovation (Bowonder et al., 2010). This plethora of conceptualizations and models leaves organizational leadership with little practical guidance and contributes to confusion on how to achieve competitive advantage through innovation. The reality is that innovation is a varied, complex concept that encompasses many components. It is not even easy to identify whether innovation has taken place, because the ultimate litmus test to successful innovation is how it is received in the marketplace, not how it was conceived or executed. Rather than focusing on specific definitions or models, organizational leaders require enumeration of the basic building blocks fostering innovative capabilities and guidelines on how to orchestrate them for success.
By studying organizations consistently demonstrating serial innovation success, we do know that successful innovation all relies on some basic building blocks. Putting these building blocks together into an overarching framework allows for infinite variability in discovery, experimentation, failure, and success and is a good place to start understanding innovation as an organizational capability.
The Innovation Strategy Framework
The innovation strategy framework accounts for the key factors identified as critical to innovation success: knowledge resources, processes, metrics (monitoring), and culture (including leadership). Figure 1 graphically depicts how the innovation success factors fit together as a composite framework.
Knowledge resources include the customers, ecosystem partners, and employees that generate innovative ideas, select appropriate ideas, promote the ideas, and ultimately create innovative solutions. White boxes in Figure 1 represent the people involved in innovation. On one side are the heterogeneous sources of knowledge providing innovative ideas and solutions. These resources are both internal and external, creating the depth, breadth, and diversity of knowledge to supply the organization with innovative fuel (Dell’Era & Verganti, 2010; Phelps, 2010; Rothaermel & Hess, 2010). On the other side, strategic domains are the knowledge resources responsible for taking innovative ideas and developing them in alignment with organizational goals and strategy (Ramírez, Roodhart, & Manders, 2011). At the top, leadership develops knowledge networks, provides resources to create innovation processes, and the creation, funding, and direction of strategic domain groups (Brown & Anthony, 2011; Engel & Del-Palacio, 2011; Ramírez et al., 2011; Rufat-Latre, Muller, & Jones, 2010).
Processes include both the processes used to integrate, promote, and develop innovative solutions, as well as the processes necessary to manage and monitor the innovation process. Black boxes in Figure 1 represent the processes for the generation and development of innovation. Following the definitions of agile innovation, the processes differ based on the type of knowledge necessary, including attracting, foraying, and experiencing (Wilson & Doz, 2011). Wilson and Doz recommended these be viewed as interactive and iterative depending on the innovation and the organizational need. Ideation using VC’s (attracting), might require rapid prototyping (Sandmeier et al., 2010; Tuulenmäki & Välikangas, 2011) using direct engagement (foraying), or the development of dedicated innovation teams embedded in remote locations (experiencing). These well-defined approaches formalize the interaction of strategic domains and innovation contributors. Processes designed to manage the innovation pipeline monitor these interactions.
Measuring Innovation Efforts:
The innovation pipeline in Figure 1 represents the process for managing and monitoring the innovation process. While the specific measures implemented by any organization will be unique and should not be the same for every class of innovation project, organizational leaders must ensure every process and project has specific measures enabling appropriate management (Chen & Muller, 2010). Chen and Muller also recommended measures related to the overall revenue and profit growth attributed to innovation, projected value of the innovation pipeline if all projects are successful, and evaluation of the pipeline status. Measures of the actual profit growth and revenue promote accountability for overall innovation efforts, while the projected value of the innovation pipeline requires the evaluation of each project in terms of expected long-term benefit; project projections also allow for organizational prioritization. Finally, measures of pipeline status, provide overall monitoring of organization innovation success by measuring the size of the innovation network, the number of ideas making it through each stage of the process, and how quickly innovative solutions reach the market.
Leadership and Innovation Culture:
Finally, effective leadership includes the support, development, and direction of innovation efforts to create an organizational culture built to achieve innovative success. Gray arrows in Figure 1 represent the actions promoting innovation within the organization. Knowledge resources are encouraged to participate in innovation development through the development of shared value (Hammon & Hippner, 2012; Lee, Olson, & Trimi, 2012; Schröder & Hölzle, 2010). Strategic domain groups support the processes of attracting, foraying, and experiencing as a source for both innovative ideas, as well as the knowledge to develop ideas into marketable solutions promoting the organization’s strategic goals (Angelis, Macintyre, Dhaliwal, Parry, & Siraliova, 2011; Sandmeier et al., 2010; Tuulenmäki & Välikangas, 2011). Leadership develops the organization’s knowledge network and provides the resources required by the strategic domains to engage those knowledge resources. (Brown & Anthony, 2011; Ramírez et al., 2011; Rufat-Latre et al., 2010). These actions develop a culture where innovation supported, and embraced as a way of doing business.
Putting it all Together
The innovation strategy framework incorporates the principal factors identified to promote organizational innovation success. Successful innovation requires depth, breadth, and diversity of the organization’s knowledge network, and the internal capabilities to identify, select, promote, and develop innovative solutions. Organizations must have appropriate processes to integrate the knowledge from the knowledge network, as well as the capabilities to appropriately monitor and manage the innovation process. The development of the knowledge network, the appropriate processes and the integration of innovation and strategy is the job of organizational leadership directly by example and indirectly through investment. The innovation strategy framework represents a high-level approach to innovation strategy without making explicit definitions of innovation or requiring specific models for innovation. The innovation strategy framework presents a holistic view of innovation, not as any specific innovation model, but as basic building blocks capable of delivering innovation in any dimension.
The value in a generic innovation strategy framework is in evaluating an organization’s overall capabilities and deficiencies for achieving innovation success as well as guiding how those critical innovation resources need to interact. There are dozens of models to develop different types of innovative outcomes (Bowonder, Dambal, Kumar, & Shirodkar, 2010), but organizations lacking the basic building blocks of people, processes, and organizational commitment are unlikely to be successful applying any of them (Christensen & Overdorf, 2000). Christensen and Overdorf specifically called out resources, processes, and organizational values as the principal factors keeping organizations from surviving disruptive innovation, not a lack of ideas or choice of innovative response. Long before organizations choose the appropriate innovation approaches, organizations must be primed to be successful. The innovation strategy framework provides a means of evaluating an organization’s readiness for innovation success and guidance for improving an organization’s chance for future success.
Angelis, J., Macintyre, M., Dhaliwal, J., Parry, G., & Siraliova, J. (2011). Customer centered value creation. Issues of Business and Law, 3(1), 11–19. http://doi.org/10.2478/v10088-011-0002-8
Bowonder, B., Dambal, A., Kumar, S., & Shirodkar, A. (2010). Innovation strategies for creating competitive advantage. Research Technology Management, 53(3), 19–32. Retrieved from http://www.iriweb.org/
Brown, B., & Anthony, S. D. (2011). How P&G tripled its innovation success rate. Harvard Business Review, 89(6), 64–72. Retrieved from http://hbr.org/
Chen, G., & Muller, A. (2010). Measuring innovation from different perspectives. Employment Relations Today, 37(1), 1–8. http://doi.org/10.1002/ert.20279
Christensen, C. M., & Overdorf, M. (2000). Meeting the challenge of disruptive change. Harvard Business Review, 78(2), 66–76. Retrieved from http://hbr.org/
Costello, T., & Prohaska, B. (2013). Innovation. IT Professional, 15(3), 64–66. Retrieved from http://www.computer.org/
Dell’Era, C., & Verganti, R. (2010). Collaborative strategies in design-intensive industries: Knowledge diversity and innovation. Long Range Planning, 43(1), 123–141. http://doi.org/10.1016/j.lrp.2009.10.006
Engel, J. S., & Del-Palacio, I. (2011). Global clusters of innovation: The case of Israel and Silicon Valley. California Management Review, 53(2), 27–49. http://doi.org/10.1525/cmr.2011.53.2.27
Hammon, L., & Hippner, H. (2012). Crowdsourcing. Business & Information Systems Engineering, 4(3), 1–166. http://doi.org/10.1007/s12599-012-0215-7
Lawson, B., & Samson, D. (2001). Developing innovation capability in organisations: A dynamic capabilities approach. International Journal of Innovation Management, 5(3), 377. http://doi.org/10.1142/s1363919601000427
Lee, S. M., Olson, D. L., & Trimi, S. (2012). Co-innovation: Convergenomics, collaboration, and co-creation for organizational values. Management Decision, 50(5), 817–831. http://doi.org/10.1108/00251741211227528
Phelps, C. C. (2010). A longitudinal study of the inﬂuence of alliance network structure and composition on firm exploratory innovation. Academy of Management Journal, 53(4), 890–913. http://doi.org/10.5465/amj.2010.52814627
Ramírez, R., Roodhart, L., & Manders, W. (2011). How Shell’s domains link innovation and strategy. Long Range Planning, 44(4), 250–270. http://doi.org/10.1016/j.lrp.2011.04.003
Rothaermel, F. T., & Hess, A. M. (2010). Innovation strategies combined. MIT Sloan Management Review, 51(3), 13–15. Retrieved from http://sloanreview.mit.edu/
Rufat-Latre, J., Muller, A., & Jones, D. (2010). Delivering on the promise of open innovation. Strategy & Leadership, 38(6), 23–28. http://doi.org/10.1108/10878571011088032
Sandmeier, P., Morrison, P. D., & Gassmann, O. (2010). Integrating customers in product innovation: Lessons from industrial development contractors and in-house contractors in rapidly changing customer markets. Creativity and Innovation Management, 19(2), 89–106. http://doi.org/10.1111/j.1467-8691.2010.00555.x
Schröder, A., & Hölzle, K. (2010). Virtual communities for innovation: Influence factors and impact on company innovation. Creativity and Innovation Management, 19(3), 257–268. http://doi.org/10.1111/j.1467-8691.2010.00567.x
Teece, D. J. (2011). Dynamic capabilities: A guide for managers. Ivey Business Journal Online, 1. Retrieved from http://search.proquest.com/
Teece, D. J. (2012). Dynamic Capabilities: Routines versus entrepreneurial action. Journal of Management Studies, 49(8), 1395–1401. Retrieved from 10.1111/j.1467-6486.2012.01080.x
Tuulenmäki, A., & Välikangas, L. (2011). The art of rapid, hands-on execution innovation. Strategy & Leadership, 39(2), 28–35. http://doi.org/10.1108/10878571111114446
Wilson, K., & Doz, Y. L. (2011). Agile innovation: A footprint balancing distance and immersion. California Management Review, 53(2), 6–26. http://doi.org/10.1525/cmr.2011.53.2.6