Citation
Davidson, A. (2013), "A concise guide for innovation leaders", Strategy & Leadership, Vol. 41 No. 6. https://doi.org/10.1108/SL-07-2013-0057
Publisher
:Emerald Group Publishing Limited
A concise guide for innovation leaders
Article Type: The strategists bookshelf From: Strategy & Leadership, Volume 41, Issue 6
Innovation Prowess: Leadership Strategies for Accelerating Growth
George Day, (Wharton Executive Essentials Series, Wharton Digital Press, 2013)
Leading companies now practice continuous innovation not just on their product and service offerings but also throughout their full range of business activities. For leaders struggling with so many opportunities proposed by their management team, George Day has written, Innovation Prowess: Leadership Strategies for Accelerating Growth, a short and concise book on the strategy and process of developing innovations. Day, a well-known and prolific researcher in the area of strategy, marketing and new product development, teaches marketing at Wharton and is co-head of the Mack Institute for Innovation Management. Readers who like a well-articulated framework for analyzing business decision making will find Days executive guide useful as an introduction to best practices.
Day believes that companies that are successful in achieving organic growth from innovation have two competencies that make them different from innovation laggards:
1. A highly disciplined growth-seeking process for seeking innovation using an outside-in approach.
2. culture, capabilities and organizational configuration (the 3Cs) and incentives that support innovation execution.
The outside-in approach is crucial, Day posits, because most often it is the customer perspective that should drive innovation.
To map the innovation choices available to a company, Day lists 14 "growth pathways." They are organized into two groups. The first group, value proposition growth pathways, addresses customer selection, offerings and the value profile of the offered product or service. They are:
1. Satisfying a latent or unmet need.
2. Overcoming barriers to consumption.
3. Entering new segments, categories or geographies.
4. Improving experience across all touch points.
5. Develop new products, services or platforms.
6. Provide integrated solutions.
7. Innovative imitations.
8. Innovating the value profile.
The second group, business model growth pathways, include both value-capturing and value creating systems. They are:
1. Changing how the firm makes money.
2. Reconfiguring core processes.
3. Shrinking the core, expanding the network.
4. Going to market more effectively.
5. Aligning to a specific segment.
6. Enabling sense and respond capabilities.
The "growth pathways" identify the full range of available approaches. Then a disciplined process is needed to winnow down the possible innovations so that the resources of the firm can converge on the best opportunities. Influenced by business plan and investment competitions, Day proposes "innovation tournaments" within a company to force cross-project comparisons as a key next step. A second step screens a project with three macro questions: is the project real (in terms of market opportunity or product creation)? Can we win (can the product and company be competitive)? Is it worth doing (will the product be profitable and will if fit our corporate growth strategy)?
A typical attrition curve from product idea to product success goes through four stages of evaluation: initial screening and evaluation, business analysis, development, testing and commercialization. This disciplined stage-gate review process produces, according to several decades of research, one successful product for every 1.3 launched and for every 11 products considered.
Days experience as advisor to many well-known companies is evident at many points in the book. For example, as companies traverse the four evaluation stages, "A critical job in managing the […] process is preventing teams from regarding screening as an obstacle to be overcome or circumvented […]. Such a misperception will subvert proper use of the screening as a learning tool for revealing dubious assumptions and identifying problems and solutions."
Many business books cavalierly refer to risk and the need for risk management but are somewhat imprecise about the recommended approach. One of the most valuable portions of the book is Days useful framing of how to get a team to quantify risk. His suggested best practice: quantify the confidence level of team members – measured by how much salary each would bet on their assumptions being accurate. The cumulative rating can then be used to rate the project as being "game over," "needing an overhaul," "requires tweaking" or "no impact because assumption is held with great confidence." In my own experience facilitating new product assessments, surfacing the assumptions of a group of managers is one of the most important benefits of assessing the potential of proposed new products. Participants are almost always surprised at the extent of unspoken disagreement among group members about the attributes of proposed innovations.
While Innovation Prowess is not explicitly about high tech product and service development, Day is a proponent of risk minimization techniques that were pioneered in the software sector, such as agile or adaptive product development. These techniques are increasingly being adopted by leading companies that have made directing innovation at customer needs and co-creating innovation with customers an essential competency.
Describing what makes a successful company a frequent innovator requires some generalization. Day argues for the importance of the 3Cs – culture (leadership, norms and behaviors), capabilities (growth seeking strategy, market learning, adaptive development and open network management), and configuration (organizational structure, resource allocation policies and practices, accountability, metrics and incentives). To reinforce the need for a customer-centric approach, he references a Booz & Company survey of senior executives that ranked the important innovation cultural issues (Exhibit 1).
Day writes: "Past innovation success is no guarantee of future success […] Too often, success leads to over-confidence and complacency, which erodes discipline and adds rigidity that slows the response to opportunities." Companies need to ensure that their incentives and funding approaches do not accidentally over-emphasize the lower risk, incremental innovations. His five parting precepts are that organizations must:
1. Focus relentlessly on customer value.
2. Actively manage the balance between discipline and creativity.
3. "Think big […] start small […] fail cheap […] scale fast."
4. Simultaneously broaden the search for innovation and converge on few projects quickly.
5. Mobilize the entire organization to address innovation.
Alistair Davidson
Strategy and business development consultant located in Silicon Valley (Alistair@eclicktick.com), is the author of Innovation Zeitgeist: Digital Business Transformation in a World of Too Many Competitors (Eclicktick, Amazon Kindle 2013).