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Introducing the Management Model Canvas© - Part 7: Innovation Model

In the next two parts of this series, we focus our attention on exploration. Exploration is all about the future of your business: it’s about innovating new products and services and even entirely new business models.


Similar to the exploitation pillar we’ve looked at in parts 5 and 6, the exploration pillar consists of two components: the innovation model and your innovation capabilities.


We first have a closer look at the innovation model.


Rationale

The innovation model describes how your organisation innovates.


Innovation is important for almost any business. In a recent McKinsey study 84% of executives agreed that innovation is important to growth and strategy and 80% agreed that their current business models are at risk.


Yet in that same study, only 6% were satisfied with their organisation’s innovation performance.


Our guess is that this huge gap between aspiration and actual performance can be explained by an inadequate (or worse: inexistent) innovation model - and/or its lack of proper integration with your overall management model.


That’s why in management model design, we place a particular emphasis on the innovation model.


Thanks to both researchers and practitioners, we know a lot about how innovation works. We know it doesn’t have to be a matter of luck.


But you need to make your choices and be explicit about two things:

  • how your organisation is going to innovate systematically and

  • how innovation is consistent with and embedded in your overall management model (having an end-to-end view of innovation)


This means you not only have to explicit about HOW you innovate but also about how innovation fits your strategy and how you create the conditions for successful innovation in your organisation - all the way through to deployment and scaling.


What goes in

  • Your strategic priorities for innovation

  • A clear differentiation of different kinds of innovation (eg, market creating innovation, sustaining innovation, efficiency innovation) and their relative importance

  • Innovation language, frameworks and theories used

  • How innovation is measured

  • Organisational setup that creates the conditions for success (degree auf autonomy and separation from daily business, supply of sufficient resources, sharing of assets, …)

  • How innovation is scaled and becomes daily business if successful


Questions to ask

  • Why do we innovate? Which strategic contributions do we expect from innovation?

  • How do we differentiate between innovation in products and services, business models, production processes and management?

  • What are our basic beliefs about innovation? Where does innovation come from? How are these basic beliefs reflected in our innovation model?

  • How do we solve the innovator’s dilemma and guard ourselves against disruptive innovation?

  • Which innovation theories and frameworks do we rely on? Why these and not others?

  • What kind of results do we expect from our innovation efforts? How does good performance look like?

  • How can we leverage existing assets for innovation success?

  • What is our advantage over a typical startup? How do we use this advantage to make success more likely?


Examples

GE relied heavily on Eric Ries’ Lean Startup methodology. It developed it into its own corporate version called “Fastworks” and built it right into the core of everyone of its business divisions - rather than to setup separate innovation units.


Intuit uses the job to be done methodology to gain a deep understanding of both its users and non-users. To create new products and improve existing products.


Intel is a great example in two ways. First, under Andy Grove it very successfully used the theory of disruptive innovation to understand and fend off threats from new entrants who would attack Intel’s microprocessor business coming from the bottom of the market.


But despite knowing better, Intel in our days still became a victim of disruption when it chose to ignore the trend towards mobile platforms because initially the market was small and margins were less attractive than in its core business. Intel famously turned down Apple’s offer to become its chip suppliers for the iPhone when it launched more than ten years ago.


The case of Intel also teaches us another lesson: that you need to continuously review all aspects of your management model and carefully examine whether it needs (re-)adjustment. Intel knew about disruptive innovation and successfully used that knowledge in the past. We doubt it was a deliberate choice to not use that knowledge and miss the boat on mobile computing. It was more likely due to a lack of care and letting a de facto management model run the show - rather than relying on an explicit management model that is based on conscious choices.

Of course your innovation model only gets you so far. You also need to build the right organisational capabilities that allow you to successfully operate by its playbook.


We’ll look at that in the next part of our series, when we cover the second component of the innovation pillar: innovation capabilities.


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© 2019 Raymond Hofmann Management

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