Innovation and creativity
Taken together, these form an essential operating system for innovation within a company’s organizational structure and culture, thought of in two groups.
- The first four, which are strategic and creative in nature, help set and prioritize the terms and conditions under which innovation is more likely to thrive.
- The next four essentials deal with how to deliver and organize for innovation repeatedly over time and with enough value to contribute meaningfully to overall performance.
Fresh, creative insights are invaluable, but it is equally impotrant to determine which ideas to support and scale.
Once the opportunities are defined, companies need transparency into what people are working on and a governance process that constantly assesses not only the expected value, timing, and risk of the initiatives in the portfolio but also its overall composition.
Innovation requires actionable and differentiated insights—the kind that excite customers and bring new categories and markets into being.
How do companies develop them?
Companies that effectively collect, synthesize, and “collide” them stand the highest probability of success.
“If you get the sweet spot of what the customer is struggling with, and at the same time get a deeper knowledge of the new technologies coming along and find a mechanism for how these two things can come together, then you are going to get good returns,” says Alcoa chairman and chief executive Klaus Kleinfeld.
The insight-discovery process, which extends beyond a company’s boundaries to include insight-generating partnerships, is the lifeblood of innovation.
Business-model innovations—which change the economics of the value chain, diversify profit streams, and/or modify delivery models—have always been a vital part of a strong innovation portfolio.
As smartphones and mobile apps threaten to upend oldline industries, business-model innovation has become all the more urgent: established companies must reinvent their businesses before technology-driven upstarts do. Why, then, do most innovation systems so squarely emphasize new products? The reason, of course, is that most big companies are reluctant to risk tampering with their core business model until it’s visibly under threat. At that point, they can only hope it’s not too late.
Leading companies improve their market intelligence, in reevaluating their position in the value chain, carefully considering business models that might deliver value to priority groups of new customers.
They establish funding vehicles for new businesses that don’t fit into the current structure.
Amazon does a particularly strong job extending itself into new business models by addressing the emerging needs of its customers by offering them an increasingly wide range of services, from hosted computing to warehouse management.
Another strong performer, the Financial Times, was already experimenting with its business model in response to the increasing digitalization of media when it launched an innovative subscription model, upending its relationship with advertisers and readers.
“We went against the received wisdom of popular strategies at the time,” says Caspar de Bono, FT board member and managing director of B2B. “We were very deliberate in getting ahead of the emerging structural change, and the decisions turned out to be very successful.”
Companies need a well-connected manager to take charge of a project and be responsible for the budget, time to market, and key specifications—a person who can say yes rather than no.
High-performing innovators speed up innovation and uncover new ways to create value for their customers and ecosystem partners.
The best companies find ways to embed innovation into the fibers of their culture, from the core to the periphery.
Big companies do not easily reinvent themselves as leading innovators.