Thursday, May 24, 2012

How fast should you innovate?

In my last two posts I've identified the need for speed, or velocity, as an outcome of innovation.  What many firms fail to realize is that the game has changed.  The rate of change in the environment has increased, and to remain "in the same place" as your firm is today - merely to hold serve - you must accelerate your product and service development capabilities.  That means improving your ability to develop and launch good ideas, which will require tweaks to your product development process, and improving your ability to find, develop and rationalize good ideas, which will mean creating a consistent, persistent innovation capability if one doesn't exist, or improving an innovation workflow if it does exist.

If, as I suggested in my post about Velocity, the adoption rate of new products and services is increasing, then the obsolescence rate of products and services is also likely increasing.  We as consumers become bored quickly, and demand new features.  Not long ago the presence of a camera in a cell phone was an amazing thing.  Then, nothing less than a 4 megapixel camera would do.  Now, in many cell phones we have cameras that challenge many stand alone digital cameras for capability and performance.  It's possible the small stand alone digital camera will become obsolete in just a few years, replaced by the cell phone.  This increase in expectation and performance is jaw-dropping in its speed, and in its impact. 

How fast/often should we innovate?
What it means to your organization is that innovation must accelerate to keep pace with the environment and with customer demands.  When we work with customers we are often asked, "How often/How fast should we innovate"?  My response is always based on the competitive landscape, the rate of change in the market, the position of the firm asking the question (leaders or laggards?).  But inevitably the answer is:  faster than you are doing so today.  And in many cases, along a much broader front than you do so today.

I want to offer a suggestion about the rate of innovation that many firms should consider.  Of course no one recommendation fits all, so take what follows as a baseline, from which you may apply your specific needs and market challenges.  What's valuable is not that you follow the recommendations exactly, but that you have a strategy or intent for innovation activities and pace.  Defining a strategy, and putting the capabilities in place to accomplish that accelerated innovation demand, will in and of itself create more awareness and more excitement for innovation.

Based on the range of outcomes
Think about the range of innovation outcomes, and your organization's goals and intent:

  • Incremental innovation - this should be happening almost constantly
  • Disruptive innovation - each business unit or product group should conduct at least one activity a year to determine the "next big thing"
A good yardstick for the range of innovation activities between incremental and disruptive is to consider the "Three Horizon" model, and plan innovation activities in each of three horizons - incremental, breakthrough, disruptive.

 These three horizons are based on the knowledge of needs and products, certainty of the need and the impact of the product or service when it hits the market.  Most firms focus only on Horizon 1, neglecting Horizon 2 and Horizon 3.  Given the pace of change, Horizon 3 expectations rapidly find their way into Horizon 1 timeframes.

Based on the strategic goal
But the measures above are simply measures of degree.  Other strategies or goals can be defined:

  • Product innovation - Innovation focused on improving or completely replacing existing products. Incremental innovation should be underway all the time.  Your team should conduct disruptive innovation on a planned cycle, preferably at least once a year
  • Service/Experience innovation.  This is innovation focused on improving customer service or customer experience, from the customer's perspective.  Again, your teams should be incrementally innovating the service/experience models regularly, and considering disruptive innovation activities for service and experience at least once a year. 
  • Business model innovation.  Innovation focused on changing how the firm makes money or competes in its industry.  Clearly a disruptive innovation, but should be considered at least once every three to five years, given the pace of change in the market space.
There's no one size fits all, but your organization should be pursuing both incremental and disruptive innovation, using the Three Horizon framework as a guide.  This is a question of speed and intent.  Additionally, your teams should be pursuing constant product innovation, and intermittent product, service and business model innovation.  These activities are no longer occasional initiatives but must become carefully planned and executed strategies.  Customer expectations, new competitors and falling barriers mean that the rate of change in the economy is increasing.  Yes, here in 2012 we are in a bit of a recession, but as the economy improves the rate of change will only increase.  Sitting still, treading water is not an option.  Neither is occasional, random innovation activities initiated by reacting to competitors.  Innovation is a persistent threat, which must be answered by persistent, high velocity capabilities.
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posted by Jeffrey Phillips at 5:33 AM


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