Models of Innovation

Seeing that my last post was about bath bubbles I thought I’d better get a bit more serious, so here’s a quick review of innovation models. First though I think it’s worth looking at definitions because in my experience a great number of people still regard innovation as scientific R&D or continue to confuse creativity with innovation.

The best definition of innovation that I’ve come across is from William Coyne, Senior VP for R&D at 3M. He defines innovation as follows: "Creativity is thinking of new and appropriate ideas whereas innovation is the successful implementation of those ideas within an organization. In other words creativity is the concept and innovation is the process". Spot on. Creativity is about ideas. It is about new ways of seeing things. Innovation is about doing things. It is about commercial implementation. Thus an idea is only truly innovative if it is introduced into a market and stays there. The test is time in market or, more precisely, the repeat loyalty of a customer.

Another thing to think about when thinking about innovation is what type of innovation suits a particular circumstance. Companies and products can be looked at in terms of life cycles and the type of innovation activity that is required will vary considerably according to the maturity of the market or the sector. Moreover, the culture of an organization and the level of risk that an organization feels comfortable with will also impact on the type of innovation activity that is most appropriate.

Some established organizations would focus on protecting existing business whereas others will focus more on improvements or growth. Ideally, of course, organizations should do all three. In terms of resource allocation a ratio of 70:20:10 to protection, improvement and growth is generally regarded as ideal and this ratio is also very applicable to Horizon 1, 2 & 3 models of innovation.

But don’t forget that the types people and processes that are best suited to protection, improvement and growth also vary. Generally speaking incremental innovation requires processes and people that are very logical and buttoned down whereas radical growth thrives on highly original thinking and this, in turn, requires highly unconventional thinkers who can be somewhat challenging to work with, partly due to personality types but also because this type of thinking is the most difficult to test.

A final thing to think about is whether you are an integrator, an orchestrator or a licensor of innovation. This model of thinking was developed by Boston Consulting Group and essentially splits innovation activity into three quite distinct areas. Integrators manage all stages of the innovation process themselves and this requires high levels of investment. This can suit incremental innovation in mature markets but this approach can also slow development down to a snails pace and increase risk quite considerably due to the level of investment and time to market.

Innovation orchestrators, in contrast, focus on core skills and experience and outsource all other areas. This is a faster and lower cost model and suits high-risk markets but success is largely dependent on the strength of the partnerships.

The final innovation model is licensing. This route is especially applicable to companies operating outside their core competencies. Investment and risk is minimalized but so too, generally speaking, is the return.

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  • John Agno

    Does innovation really deliver?

    More than half of the Top 25, with histories as public companies, in BusinessWeek-Boston Consulting Group 2006 senior management survey on innovation scored with better profit margins and higher stock prices over the past decade.

    The innovators achieved median profit margin growth of 3.4% a year since 1995, compared to 0.4% for the median Standard & Poor's Global 1200 company. And the group's median annual stock return of 14.3% was a full three points better than the S&P 1200 median over the decade.

    More than 50% of survey respondents said the CEO or chairman was responsible for driving innovation. Without targeted support from the corner office, innovation efforts will get lost in the corporate culture need to respond to short-term demands.