How Should Corporates Innovate?

I just went to a local Meetup group where this question was posed and I thought I might summarise my thoughts on the matter. In writing this I am horribly aware that we may get into a debate on semantics

Let’s deal up front with the question of “corporate innovation” and simply define it as “a new method, idea or product/service that delivers business benefit”.

The let’s deal with the”should they or should’t they” question. If we assume that each and every business began through introducing a new idea, method, product or service – including copying an existing product but changing it in some way – even if only the name – then the conclusion is “should”.

The trickier question is “how”.

If we start with the Porter’s Five Forces model as the pre-dominant corporate strategy model for the past 30 years then the dimensions of “how” would likely center around those dimensions (threat of new entrants, threat of substitution, buyer power and supplier power). Meaning that each innovation can be dimensioned as if it was mean to gain competitive advantage in one of these dimensions, for example a process improvement that lowers dependancy on a single supplier might address the supplier power force.

This model might work for what some now call “sustaining” innovation but most students of innovation will be aware of the work done by Clayton Christensen on “disruptive innovation“. Additionally here are numerous publications around “open innovation”, “reverse innovation”, “lean innovation” and so forth. At the risk of offending students of these approaches let’s label them all as “doing something radically different” (or DSRD).

We can all argue that in various technology-led industries that DSRD has fundamentally changed the dynamics of business. With the increasing digitalisation one could argue that all industries are affected.

I am going to offer the (rather banal) view that:

CodeCogsEqn-2

HSCI = How Should Corporates Innovate

SI = Sustaining Innovation

DSRD = Doing Something Radically Different

All I am really saying is that it is a mix of sustaining and different, and that mix depends on the rate that the past innovations are declining offset by the future returns appropriately modified by a risk-reward formula. Not really rocket science (just simple LaTex) but the compelling thing for me about this formula is that it blends past numbers with future projects into a single number. As time passes the right hand side shifts towards the left hand side so, providing your measurement and projection cycles are tight enough, you can build a really tight “innovation machine” that perfectly blends the creative with the analytical.

 

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