Albert J. Di Rienzo
President
RedSky, Inc.
For many companies, sustaining a pipeline of profitable innovations is elusive, and for those that are fortunate to have a robust pipeline of innovations they are often incremental innovations, with a low-level of impact and value versus radical or breakthrough innovations, which typically have a much greater impact, and return a much higher value. Though books have been written, and courses taught about innovation and entrepreneurship, I wanted to take this opportunity to share my insights from 31 years of diverse experiences by penning this brief article; I hope it will provide some guidance on how to achieve sustainable, profitable innovation – where innovation (for the purposes of this article) refers to the commercialization of invention, and product is used in the broadest since (e.g., a tangible or intangible offering for commerce, a service, a business model).
As mentioned above, innovation falls into three categories, each
associated with escalating risk and uncertainty, and respectively, escalating impact
and value. First, there are incremental
innovations, which are evolutionary products, and therefore the next logical
progression within a product’s life - improving the product within an existing
market in ways customers are expecting. Second,
there are radical (or disruptive) innovations, improving a product in ways that
the market does not expect. This is typically by being lower-priced or designed
for a different set of consumers by applying a different set of values. Finally, there are breakthrough innovations,
which are revolutionary products that create a new market by having a major,
sudden impact on society, or on some aspect of human endeavor. Radical and breakthrough innovations
typically improve upon the existing gold standard product by an order of
magnitude, or fulfill a considerable unmet need.
While there’s a plethora of topics one must consider to achieve
sustainable, profitable innovation, leadership,
organizational design, infrastructure, and patience are some of the more pertinent
ones in determining success. Taking them
in order, there must be the executive level leadership that champions a culture of innovation, and is responsible
as well as accountable for realizing an innovation culture strategically and
operationally. Therefore, leadership
must support the new or modified organizational design; set the tone for the
level of risk the company is willing to tolerate; be highly communicative at
all levels in the organization; monitor the metrics; ensure adequate resources;
and assist with the instantiation, implementation, and institutionalization of
the resulting organizational design. Company
leadership needs to make a conscious effort to formulate and institutionalize a
culture of innovation—whether internal or external—and not all at once, but in
a methodical, communicative, refined way. The culture should become a way of
life, and be highly visible internally as well as externally.
Organizational
design
sets the foundation for a culture of innovation. Culture - in great part - determines whether
a company will be successful at innovating, and in many cases, it’s the single
greatest inhibitor to innovation. Every
company has a defined culture that's established by its leadership, or the
company’s history. A company's culture
can be formal, and therefore, visible and promoted, it can be an operational state,
or somewhere in between. Organizational
design includes organizational structure, levels, responsibilities,
accountabilities, rewards, and the like.
Adequately established, the organizational design will allow the
necessary freedom to operate as a culture of innovation as well as freedom to
incubate the ideas within the company’s risk tolerance. If the company has a low-level of risk
tolerance, then incremental innovations will most likely be the primary focus;
if the company has a moderate-level of risk tolerance, then radical innovations
will figure prominently in their portfolio; and if the company has a high-level
of risk tolerance, then breakthrough innovations will figure prominently in
their portfolio.
Regardless of the company’s risk tolerance level, there should be
a balanced portfolio, with the majority of incubation being in the company’s
primary risk tolerance level, yet with some activity in the other two
innovation categories. If a company is
not able to innovate within its walls, it can choose to innovate through a
spinout entity, or via a collaboration partner, or a collaboration network.
In order to successfully establish and maintain the organizational
design that will yield a sustainable flow of innovations, the company must institutionalize
the necessary procedures, processes, methodologies, and supporting tools (i.e.,
infrastructure), with the key word
being “necessary” since many companies have the tendency to constrain the
organization with over burdensome, unnecessary, and ineffective infrastructure,
thereby, stifling creativity and productivity.
Many times the tools and methods were selected prior to the processes,
and therefore the adoption of the processes, or the company's best practices,
become the output of the tool, instead of the processes defining the tool(s). The key is to define the processes first.
Finally, the company leadership must ensure patience of time since an existing company will not necessarily realize
a culture of innovation in a relatively short timeframe; whereas, a new company
may realize a culture of innovation sooner due to the lack of established
organizational design and infrastructure.
There must also be patience
of money since it will take on-going financial resources to adequately build
and maintain the culture. There’s
typically a ramp-up phase that requires additional financial resources, yet
with time and success, financial resources can be appropriately managed in
order to ensure the innovation culture is not constrained (e.g., consistent percentage
of top-line dollars channeled to innovation).
To
be successful, make a conscious, deliberate decision to have a culture of
innovation, institutionalize the culture, leverage process in support of the
culture, be patient, and realize the innovation. Consistently and meticulously
refine an innovation culture that encompasses continuous process improvement in
order to continue a flow of innovative intellectual capital and innovative
products to support the innovation culture, and leverage methods, tools and
best practices that support the process.
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