Innovation Playbook

Posts concerning the Innovation Strategy Framework

The Innovation Strategy Framework

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.

InnovationModel

The Innovation Strategy Framework

Knowledge Resources:

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).

Innovation Processes:

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.

 

References

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

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.

 

References

Birkinshaw, J., Bouquet, C., & Barsoux, J. (2010). The 5 myths of innovation. MITSloan Management Review, 52(2), 43–50. Retrieved from http://sloanreview.mit.edu/

Bodley-scott, S. (2011). Linking innovation to strategy. Training Journal, (March), 64–67. Retrieved from http://www.trainingjournal.com/

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

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

Hammon, L., & Hippner, H. (2012). Crowdsourcing. Business & Information Systems Engineering, 4(3), 1–166. http://doi.org/10.1007/s12599-012-0215-7

Kim, Y., & Ployhart, R. E. (2014). The effects of staffing and training on firm productivity and profit growth before, during, and after the Great Recession. The Journal of Applied Psychology, 99(3), 361–89. http://doi.org/10.1037/a0035408

Mahroeian, H., & Forozia, A. (2012). Challenges in managing tacit knowledge: A study on difficulties in diffusion of tacit knowledge in organizations. International Journal of Business and Social Science, 3(19), 303–308. Retrieved from http://ijbssnet.com/

McGrath, R. G. (2011). Failing by design. Harvard Business Review, 89(4), 76–83. Retrieved from http://hbr.org/

Mullins, J., & Komisar, R. (2011). Measuring up: Dashboard for innovators. Business Strategy Review, 22(1), 7–16. Retrieved from http://onlinelibrary.wiley.com/

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

Šebestová, J., & Rylková, Ž. (2011). Competencies and innovation within learning organization. Economics and Management, 16, 954–961. Retrieved from http://connection.ebscohost.com/

Shepherd, H. (2012). Crowdsourcing. Contexts, 11(2), 10–11. http://doi.org/10.1177/1536504212446453

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

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