Innovation Value Webs to drive innovation - Part 1
Setting the scene
In today’s globalized economy, companies are facing ever-tighter margins, ever-faster time to market and leaner and swifter business (operating) models. Companies have to be in a continuous search for innovative products, services and processes to stay one step ahead of the competition. A real challenge, especially for large scale enterprises, because of their size they are acting less agile and are far more bureaucratic than the new players on the market.
Or as Hubert Tardieu stated in an earlier post:
"Continuing economic uncertainty is making it increasingly difficult for organisations to drive value. This is especially true for large scale enterprises - their sheer size tends to increase inertia and reduce business agility."
To disrupt or to be disrupted!
So for some enterprises it is even to disrupt or to be disrupted! Just think of what happened to Kodak and compare it with Instagram or look at how Whatsapp, Uber and Airbnb have disrupted existing markets. Your market could be next, so you have to find ways to get the full benefit of your innovation processes by re-thinking, enriching and including the opportunities offered by the outside world.
In a series of two posts, insights will be provided why innovation value webs could help large scale enterprises to innovate faster with less risk by unleashing the power of all to innovate. In this first post I will set the scene and in the second one we dive a bit deeper how Innovation Value Webs can power innovation and why it is different.
Why could large scale enterprises be stuck with their innovation processes?
Large enterprises have a tradition to be excellent in executing structured business processes to deliver value to the end customer. It is all about standardizing for efficiency, ensuring performance predictability and minimizing risk. This is done by crafting a plan, setting budgets and targets followed by a set of reporting KPI’s to deliver feedback on performance. The top of the organization is guarding and steering the managerial hierarchy to ensure targets are being met.
In short a large enterprise is a permanent organization designed to execute a repeatable and scalable business model in a known environment.
In the words of Steve Blank: “They’ve found product/market fit (what products customers want to buy). They’ve learned the best distribution channel to get the product from their company to the customer. They’ve figured out the revenue model (subscription, license, direct sale, etc.) and how to price the product. They know the activities, resources and partners (manufacturing, regulation, IP, supply chain, etc.) – and the cost to deliver the product/service and have well defined product development and product management tools that emphasize the linear nature of shipping products to existing customers. There are financial metrics (Return on Investment, Hurdle Rate, etc.) for new product development that emphasize immediate returns. And everyone has job titles and job descriptions that describe their role in execution.” (http://steveblank.com/2015/03/11/fear-of-failure-and-lack-of-speed-in-a-large-corporation/)
Large scale enterprises have the tendency to manage the innovation process in the same way. So specialized R&D units are added to the overall structure to boost innovation, but they can easily fall in the ‘linear execution’ trap whereby innovation has become part of a formal business process. And if we make a generalization in this case, it could be said it relies mostly on a linear stage-gate approach in combination with an overall innovation funnel.
In general, the stage-gate approach assumes that the initial proposed strategy is the right strategy; the problem is that except in the case of sustaining innovations, the right strategy cannot be completely known in advance and when discovered the strategy is not right, it is too late. In software development terms the stage-gate approach can be compared with the Waterfall development approach.
If organizations want to bring more breakthrough and disruptive innovations to the market, it has to enhance the innovation processes with new capabilities, because you cannot build a solid business case/plan when the problem and/or domain definition are not clear.
So following the stage-gate approach, it can create a risk when applied to breakthrough and disruptive innovations, because you will only know at the end of the innovation process, if it will succeed in the market place. We are not suggesting to replace the stage gate approach with something new, but to find additional methods to approach breakthrough and disruptive innovation, like an innovation value web. An innovation value web utilizes the possibilities offered by enterprise social software to connect people, ideas and budget not hindered by hierarchical structures and/or organizational boundaries.
How innovation value webs unleash the power of all to innovate will be the topic of my second post.