Building an innovation framework that has real capabilities at its heart.

SCA FormulaI’ve strongly believed when you begin to think through a framework for innovation, see my last article as an example, you also should equally need to recognize the capability framework that you will need to build into this.

Working through these as essential combinations can become the real enabler.

Here is my solution that I think is worth working through, to firstly absorb and then consider for applying to your own innovation building activity. Try it!

I have worked on a formula SCA = II + OC + EE + MLC + RNE for this. I have never published the make-up of this in the public domain before, although I had briefly outlined it in a past post here. In that post I outline my thinking and I do not think it needs repeating, does it?

The formula is the combination of positive relationships between the following interrelated parts:

Seeking out a working Sustainable Competitive Advantage (SCA)
What do you want to achieve from selecting the expected SCA  outcome choices? What do you need to frame as the SCA by using the parts of the formula?

  • Extent of market advantage (posses distinctive advantage)
  • Competitor’s difficulties to duplicate this, where unique advantage is often found
  • Strategic leadership is prevalent and nurturing and valued
  • Understanding “superior” marketplace position (in revenue and cost advantage)
  • Creating it, capturing it and keeping it distinctive
  • Facilitating, accelerating and sustaining the diffusion process across the organization
  • How you seek relative advantage, achieve compatibility, reduce complexity, encourage trail-ability and ensuring observe-ability.
  • Advancing the clear “line-of-sight” new business always requires to execute upon.
  • Looking to achieve better visibility, flexibility, extending collaborations and advancing concepts through technology and structured approaches.
  • Other strategic objectives requiring distinct capabilities to be built into these 5 groups

Innovation Intensity (II) and the degree of adoption

  • Extent of product, process, managerial and business innovation
  • Mix of technological and non-technological innovation
  • Impact of innovation expected through strategic leadership
  • Magnitude of change capacity required through innovation
  • Scale of innovation impact desired
  • Plotting out the roadmap for innovations evolution
  • Exploring the different types of innovation and their potentials
  • The use of Business Model innovation to change the proposition
  • The essential linkage between strategy and innovation outputs and outcomes
  • Investment x activity x focus x disruption = return on innovation expectations

Organizational Capabilities (OC) in developing their distinct differences

  • New knowledge acquired and embedded, exploring new context and ways
  • Ability for value creating activities to be accumulated, integrated and transferred
  • Adaptive learning (leads more to incremental innovation)
  • Generative learning (willingness to question long-held assumptions)- favours radical
  • Relational learning (collaborative linkage, networking for open innovation)
  • Distinctive learning of new knowledge to create added value directly.
  • Experimental learning tolerance with new ways of doing things
  • Learning from both internal and external knowledge focused positions
  • Encouraging co-production of concepts (ideas, components, systems, R& D)
  • The ability to also unlearn (long held assumptions, group-think)
  • Structural evaluations into routines, procedures, systems, culture etc
  • Releasing latent capabilities- discovery and exploitation- as capital in waiting
  • Linking the three capitals- human, structural and relational- for interactive leverage
  • Combining complementary assets and dynamic capabilities to configure & reconfigure
  • Build the technology skill sets focusing on collaboration
  • Encourage techniques for formalization, exploitation and generation
  • The value of Absorptive Capacity in acquisition, assimilation, transformation and exploitation.
  • Seeking out the buy-in from the cross-functional business units

Entrepreneurial Energy (EE) promoting and generating

  • Entrepreneurship facilitates generative-learning activities as the focus
  • High tolerance of risk-taking, exploring the unproven, seeing patterns and shifts
  • Pro-activeness in new directions, new capabilities, dynamics and mindsets
  • Use of accumulated capabilities (coordinating, preserving and supervising)
  • Key decision makers’ traits to investigate and encourage change, risk-taking propensity
  • Positive outlook towards diversity & different behaviours, discovery and experimentation
  • Providing a learning environment through trials and pilots that can scale quickly

Market Learning Competence (MLC) for establishing a clear awareness

  • Through marketing capability and market understanding vigour
  • Market focused to acquire, disseminate and use knowledge acquired
  • Exploit through sensing & scanning conditions for diverse and unrelated opportunity
  • Possessing a close interaction with customers, users and suppliers
  • Ability and speed to react to the variability of the environment
  • Possess a high level of competitor awareness
  • High levels of customer orientation and “over-served”/ “undeserved” insights.
  • Always orientated towards innovation not just new product development
  • Building agility and responsiveness into constantly changing market conditions
  • Getting to the “heart of the customer” in outcome driven ways for their needs.

Relationship & Networking Effects (RNE) and its support to enhance

  • Building greater exchanges of knowledge through interactions
  • Encourage constant practice of sharing
  • Promote systems of relationships and the structures needed
  • Strengthen alignment and appreciation of value-adding activities
  • Connecting Knowledge Management with finding ongoing Business Value
  • Combing Knowledge with constant practice & sharing
  • Support to enhance the needs and guidance through good governance
  • Resolve actively the barriers and concerns
  • Build trust, connectedness and belonging
  • Build common purpose and share the vision
  • Build identity and offer difference to stop leakage of knowledge
  • Actively connect people to people, people to knowledge
  • Gain alignment, be transparent, build identity and encourage networking
  • Support the patterns of exchange, their impact on value,
  • Assess the dynamics and new value potentials in the different exchanges
  • Linking the collaborative efforts to define, align and stimulate innovation targets, strategies and initiatives to support ongoing and sustaining success
  • Measure robustness, diversity and renewal
  • Searching for defining and designing complementary platforms.

Brief background and some thoughts

On first take all this seems is a long list, actually this is offered on purpose. You add your own distinct needs within this formula but take care not to dismiss any suggestions offered here, without ‘good cause’.

The challenge is how you see it, how you value its ability to connect context and the content or aspects you want to focus upon. These structures or building blocks you can start individually adding your unique “flesh to the bone”.

Let this become an innovation capability formula that stays in your head and you constantly ‘walk around’ its parts to get increasing connection and momentum to build its value from others needing to relate to what is important to building sustaining capabilities.

I got the original idea of this framework a number of years back by reading through some different thoughts that Jay Weerawardena’s had put together in a number of assorted papers. These assorted ideas and concepts partly fuelled my idea that lead to this ‘combining’ concept of mine, finally published here.

I feel we need to provide a framework that can be worked in ways that build your own unique capabilities. By focusing on these key components that do tend to make-up innovation that leads to sustaining ongoing competitive advantage you can frame and measure activity.

The other formula to measure this against

The one other formula I use with this is measuring its return on investment. This is

ROI FormulaSo a framework and a formula to measure its impact against. Does this make sense to you? It has to me for years. I just thought I’d publish it a little wider than limiting it to a chosen few.

Really do think about it, experiment with it and see if it does not give you the increased intensity and focus you are needing for building greater capabilities. I think you will find it does give you a powerful framework to build those capabilities around, needed to deliver real advantage going forward.

 

Figuring out a different strategic alignment with innovation being central.

Strategy as we have previously known it is officially dead. Strategy is stuck! Competitive advantages have become transient. We are facing situations where advantages are copied quickly, technology is just one constant change, and our customers seek other alternatives and things move on faster and faster.

In a new book written by Rita Gunther McGrath, a professor at Columbia Business School in New York and one of the world’s leading experts on strategy, she has been exploring the changes rapidly taking place called  “ The End of Competitive Advantage: How to Keep Your Strategy Moving as Fast as Your Business

 “Strategy (in the past) was all about finding a favourable position in a well-defined industry and then exploiting a long-term competitive advantage. Innovation was about creating new businesses and was seen as something separate from the business’s core set of activities.” “Sustainable competitive is not just ineffective, it’s actually counter productive” says Professor McGrath.

She rightly states:“Think about it: the presumption of stability creates all the wrong reflexes. It allows for inertia and power to build up along the lines of an existing business model. It allows people to fall into routines and habits of mind. It creates the conditions for turf wars and organizational rigidity. It inhibits innovation.

It tends to foster the denial reaction rather than proactive design of a strategic next step… A preference for equilibrium and stability means that many shifts in the marketplace are met by business leaders denying that these shifts mean anything negative for them.”

Innovation needs to finally emerge in a new form.

Innovation cannot be separated from implementing an effective strategy, actually it is becoming far more central. Yet our leaders are constantly failing to recognize their essential role they must play to allow innovation to realize its place within the goals and needs of the strategy. They will be in denial by failing to build the innovators organization to manage this  new transient advantage. One that is highly flexible, agile, built around a constellation of emerging business principles that builds upon the ethos of imagination, exploration, experimentation, discovery and collaboration (Steve Denning).

A new structure that has as part of it one that promotes independence, diverse thinking and seeking out individual contributions. To achieve this innovation needs to be fully embraced as a clear competency that does need to be professionally built and certainly well-managed; it needs leadership’s total engagement for establishing new principles, practices, attitudes, values and beliefs that become central to the new way forward to deal with this new transient advantage suggested by Professor McGrath.

Today the rhetoric outweighs the reality for innovation and we need change!

Survey after survey of our leadership within organizations talks up innovation

  • * Over 70% of CEO’s surveyed constantly named innovation as within their top three strategic priorities
  • * 93% of surveyed executives said the long-term success of their organization’s strategy depends on their ability to innovate
  • * For almost 90 percent of CEO’s, generating organic growth through innovation has become essential for success in their industry.
  • * Also over 70% of the top executives identified themselves as the primary driver of innovation

Yet innovation is failing, reality is constantly hitting home in poor results.

  • * Despite increased business investment in innovation, only 18% of executives believe their company’s innovation efforts deliver a competitive advantage.  Source: a new Accenture study (May 2013)
  • * The “absence of a well-articulated innovation strategy” was identified as the most important constraint hampering organizations from reaching their innovation targets, in a study published by Capgemini Consulting in April 2012
  • * Almost 60% of firms surveyed admitted that they have no explicit innovation strategy ( a joint Cap Gemini and IESE study)
  • * Only one-third of the executives report innovation is fully integrated in corporate-level strategies (McKinsey Quarterly, 2012)

Then you go deeper into organizations current position on innovation

The formal management of innovation is largely overlooked and to quote these statistics from an Innovation Leadership Study in March 2012:

  • *Only 30% of respondents agree they have an effective organization structure for innovation
  • *45% do not have a well-defined governance structure for innovation
  • *40% lack clear roles and responsibilities for innovation
  • *39% state they do not have an effective decision-making process for innovation
  • *49% are not having a well-defined process to prioritize and allocate time and funding to innovation projects
  • * 54% of those surveyed indicate they do not have a formal KPI system for promoting innovation

Innovation comes to a screeching halt because it is not totally integrated and fully supported from the top and embedded into the core of organizations. Innovation is failing to deliver on its potential. Can you imagine all that invested time in innovation, on tasks, products, concepts, ideas that fail? There is real waste  if innovation is not fully aligned to the strategy.

If these constantly don’t align to corporate strategies, someone somewhere should be concerned, I mean really concerned. Perhaps as “mad as hell” and we are not going to take it any more. Something has to change or many of these organizations will not exist in the future .

The great disconnect at the top of organizations for innovation is in plain sight for all to see.

So we must see there is a huge gap that does exists between what executives want, and what the business believes and is knowing what is actually going on.  Innovation for its needs actually lie in the senior executive own hands:

  • Executives need to demonstrate that they want and need innovation
  • They must become more engaged and outline (in some detail) their expectations
  • They must create a framework or structure to ensure it exists

Innovation success starts and stops with senior executives. 

They want innovation success but they consistently fail to understand their part within the innovation need-to-succeed. Only senior executives can:

  • Communicate and develop the innovation vision and work towards actively reducing the barriers it faces within their corporation
  • They need to bridge the existing culture with one that promotes innovation, where both short-term need and long-term sustainability are equally encourages and worked upon
  • Influence and encourage the breadth of skills and capabilities needed in innovation to be given the appropriate focus for its organization to successfully innovate
  • Establish the environment and then create and support the incentives where innovation can flourish effectively.
  • Work constantly at ensuring the conditions for success is well-communicated and the clear goals and expectations are articulated.
  • The top executives must understand the investment required for innovation and provide the adequate resources and funding along with clear directions
  • Actively seek alignment of the innovation activities into the strategic needs they see as critical to work towards
  • They need to set the innovation strategic agenda and provide a robust and clear integrated innovation framework like the Executive Innovation Work Mat, for example.

The sad, sad truth is that many of our leaders still cannot get comfortable with innovation.

Many of our present leadership of organizations are actually uncomfortable with innovation; they want to keep it on the periphery of their thinking.  It disturbs much of what they have worked all their careers upon, honing a highly efficient and effective organisation that minimises the risks, reduces the surprises and works away in a highly predictable and steady way.

They often lack any real depth in innovation experience and training. They are fixated on the short-term, often to the detriment of the longer-term opportunities due to tenure and their incentive metrics.

Today the senior executive loves to get fully involved in the urgent needs of the day, moving constantly from one operational oversight meeting into another, spending decreasing time on the important. The pressures and demands placed on them to respond, to react, to comment on day-to-day events, are growing in priority to be seen as ‘being on top of these’  but are they losing the longer-term perspectives and detachments needed for designing organizations differently? To meet rapidly changing challenges and actively working upon new organization designs to give a new fitness and intent? Often these seem rushed and reactive to threats or poor results.

The larger the organization, also the greater the disconnect is happening between themselves and their employees and this is creating increasing growing barriers to understand the pulse of the business or stay tuned to market shifts. Organizations are losing any competitive advantage as they are failing to see a huge change taking place before their eyes as they remain rigid and fixed, locked in the past. Internally alignment is becoming harder. Advantage is only short-lived, yet our organizations are totally encumbered by out of date designs and structures.

Organizations are being challenged far more today and their relevancy needs radical redesigns and stepping back and designing these is becoming critical. The core of our organizations needs to shift towards more agile, adaptive and innovative designs.

The need for a real alignment of strategy and innovation

Innovation stands in service to strategic goals such as growing market share, differentiation and disrupting adjacent markets, serving the consistent changing and demanding customer needs by spotting these and then exploiting them rapidly and effectively.  Creating clear goals and linking/aligning innovation to those more agile strategies is a vital role for CEO’s and senior executives.  Senior executives must establish the manner in which innovation fits within the strategic context established by goals, vision and strategies.They cannot abdicate this role. Change is hard, so is innovation.

However, even when executives understand the linkage, they may fail to understand how to ensure linkages between corporate strategy and innovation actually does lie with them to be communicated throughout the organization.  When executives simply request innovation and delegate the decisions and definitions to business line leaders or executives outside the boardroom they are delegating the growth and future of the organization to others. They are killing the true potential of innovation as it remains unaligned. This cannot continue, we need to bring innovation into the boardroom as core.

If we are in a world of transient advantage as Rita Gunther McGrath suggests, she also clearly states: “Innovation needs to be a continuous, core, well-managed process rather than the episodic and tentative process it is in many companies”.

Identification comes from the top and from our customers

This new innovation core can only be led and fully integrated from the top, aligned fully into the strategies, organizational design and the goals. In rapidly changing market conditions where advantage is transient then we certainly need very different designs within our organizations to respond.

It is absolutely time that innovation comes fully into the board room and driven from the top. Innovation needs to be recognized fully as the key to more prosperity, more growth and added value – achieving that is the mandate of the board and this requires an explicit integrated innovation framework, no less that reflects the changing reality of the era we are in. Then others can simply get on with the job of responding by delivering the innovation outcomes that are constantly aligned to the needs within the changing landscape and demands placed on all, to read, react and respond differently and this needs total integration from top to bottom through an overarching set of integrated frameworks.

A different alignment is required.

Alignment is just not the internal need any more; it is having clear external alignments as well; in knowing the customers needs and reacting to these faster and with clear competitive intent, aligning with others on different platforms and collaborations.

Having an innovation geared organization that has clear goals, principles, values and attitudes that is working towards a consistent range of organizational possibilities. One that is ready to capitalize on breaking opportunities, aligned to exploit these. Then having in place the capabilities to build rapidly out on these to exploit these through new learning, new insights and growing connections so extending the possibilities even further.

A constant evolving strategy perhaps, one that will give the organization a new more demanding competitive advantage, that is built on anticipating and managing constant change, never standing still, always evolving, being in perpetual transition.

A different ‘sustaining’ capacity built around innovation as the continuous core, constantly evolving, adapting, learning and adjusting. In perpetual innovation motion.

Linking innovation context to the process

Time passes extremely quickly, particularly when you enjoy yourself, or so it seems for me. I was surprised, going through some of my past blogs, the time between related entries on the need for having in place a sustaining competitive advantage framework on innovation, has been longer than they it should have been. This blog is the third entry on this subject.

Always, always and always do I see organizations struggle to align themselves for their innovation activity, why is this? Either alignment of innovation into the strategy they are (assumedly) following or shaping innovation into the context of where and how innovation can fit.

I’ve written on this often enough actually, and argued the need for building a more sustaining innovation framework.  I have been working for some time within one of my formulas on this with its given framework of II + EE + MLC + OC + RNE build towards = SCA. I somehow suspect you need nudging on what this means

Required past reading possibly needed here.

Without duplicating more than necessary you need to go back and read two previous blogs on this

The first was written in August 2010 and entitled “A formula for Sustaining Competitive Advantage through Innovation”. The link is here:  http://bit.ly/95kCI1

The second was written in June 2011 and entitled “Sustaining is Pivotal to Making Innovation Progress”. The link is here: http://bit.ly/lPLssm

Both offer a helpful introduction to the framework and formula.

The next part of the equation

This blog ‘advances’ this framework by attempting to link the context of innovation into a process to think through. I say attempting because we need to accept each building process is different, and unique to the organization and the circumstances of what they want innovation to achieve, besides the standard reply “growth and profit”. Doesn’t this always sounds like the famous question asked at beauty pageants: “So what’s the most important issue for you?” asks the compare with the reply “world peace”. Oh, I wish it was so simple.

Those leaders that talk of “growth and profit” from innovation seem to reduce it to just a sound bite, I just wish it was so simple. I do wish the majority of our business leaders would get ‘into’ innovation understanding a lot more. Innovation breaks down always outside the CEO’s executive door and it really does need them to step outside and get more fully involved as it is a major area to succeed at if a longer tenure is in their minds.

Still, I digress. Here I outline how I see a typical linking through of a context to innovation in a ‘flow through’ process that is shaped along the II + EE + MLC + OC + RNE build towards = SCA, framework.

Innovation Alignment, Context & Process

Innovation Alignment to the Corporate Strategy does need working through. It needs linking to business goals and strategy, to the role innovation plays within this, the type of innovation portfolio you wish to design and work upon and the delivery and adoption needed so the organization ‘aligns’ itself. You need a thinking-through process to align context into activity.

This takes time, it needs sustaining effort but it needs leadership to understand the critical connecting parts to do this. It needs a defining framework that I see as separate to what I’m offering here. On my present rate of outlining this it does seems sometime next year for that – not good news for those interested.

Watch this space

Actually let me share a little secret between us,  I’m working on a more radical, visually appealing and exciting way to approach this now but within a joint collaboration around this critical issue. So, who knows this might be discussed earlier than my past track record of once a year to move from one aspect to another. It needs to be and I’m sure my collaborating partner on this will be pushing me a lot harder going forward.

Sustaining is Pivotal to Making Innovation Progress

The greater challenge today with innovation is to build a more sustaining framework for innovation to be consistent, like a beating heart, day in and day out.

The struggle is what constitutes the right areas to frame and build innovation capability upon? I argued last year in one of my previous blogs there was a formula. If you go to “A Formula for Sustaining Competitive Advantage through Innovation” at   http://bit.ly/95kCI1 it introduces this. Now we need to align this further.

The Formula for Sustaining Competitive Advantage

Taking this one step further and linking it.

I have repeatedly suggested innovation needs to be dynamic, where you need to understand your fitness landscape (see blog http://bit.ly/bxTeYO and http://bit.ly/e7M62A) that relate on this ground breaking concept.

A sustainable innovative organization needs to be extremely fluid and “organic” in the way it treats innovation to foster constant creativity that is vital for the success of its future growth and wealth creation. Some thoughts:

  1. It has to work out ways to creating value, Besides encouraging ideas that can come from anywhere, inside and outside the organization it has to invest in its cultivation process, as ideas have to add value, they have to connect to the strategic need of the business
  2. Innovation is a Dynamic process: Innovation for the company is as “oxygen”, it is the life blood and this has to be delivered constantly to all cells and bodies,  not just for survival but for obtaining fitness and then begins to achieve this sustaining itself as part of a natural routine.
  3. Innovation is part of the recognition that business is not as usual, or achieved by approaching challenges in the market place through past tried and tested ways. We need to think differently to thrive let alone survive. Perspectives have to be broadened out and challenged more. The organization needs to invest in its people constantly to ensure the possibilities of achieving a healthier future. We need improved capabilities.
  4. We need inclusive thinking both internally and connecting externally. Many are realizing the incredible benefits of moving more towards insight-driven innovation that promotes, stimulates and drives the innovation process. I’ve commented on a few of these previously.
  5. Insightful-driven innovation comes from opening up to diverse views, internally and externally, and we need to ‘push’ closer to the edge of possibilities. To do this we need our people to be confident to translate what they pick up as often a ‘faint signal’ and translate this into actions and opportunities to explore within the innovation process with increasing confidence and all the best possible support.
  6. To encourage this we need sustaining and clear leadership. People want to be inspired, to understand a vision and feel they are very much part of the future. We all seek identification. Executing through a framework of activities that promote learning, improve competencies, promote latent energies and provide intensity of purpose are all far more exciting to be part of than the many remote leadership models we often see today who lack responsiveness and empathy.
  7. To achieve this new sustaining point, we need to measure innovation, not as a ‘nice to have’ but as an ‘essential to have’, a core aspect of employment. To achieve this we need to build around a ‘given’ framework, one that multiplies and leads to sustaining competitive advantage by adding II + EE + MLC + OC + RNE to equal = SCA.

The suggested organizing SCA framework has a number of sub components that make up each of its parts. I am certainly happy to expand on this through my practice on innovation. You have the contact details if you are interested. We do need to move beyond the present, more static confines of innovation.

A Formula for Sustaining Competitive Advantage through Innovation

Sustainability is central to innovation’s future progress

Today’s challenge for me is not only to be building the innovation capacity but also to be establishing clear ways on how we should set about sustaining it. Increasingly it is necessary for organizations to have a capability and capacity to sustain Innovation so it can provide the stimulus for lasting growth. To get there though, it does seems this must be through continued learning so your capabilities become stronger, evolving and more unique, thus making them more difficult for competitors to understand and imitate.

Let me outline an innovation framework that builds capability through a sustained approach.

When you set out to build capability to be sustaining you need to consider there are two types of capabilities, distinctive, which are the characteristics of the organization which cannot be replicated by others and reproductive, which can be bought in by the competition but always need to need to be appropriate to any objectives you are trying to achieve.

Focusing on improving the capabilities of your people needs in my opinion five essential elements and applying these through consistent application and measurement and sustaining this within your activity leads to a greater potential to sustain innovation and will lead to sustainable competitive advantage.

To achieve greater sustainability I believe the five elements within this model can provide the path to this.

SCA = II + EE + MLC + OC + RNE

So what is within this framework?

Sustainable Competitive Advantage (SCA) comes from the combining effects of the following:

  • II Innovation Intensity- its degree of adoption, the investments made, the multiple level of activities and the focus of the intensity given to building capabilities to innovate.
  • EE Entrepreneurial Energies- this os more on how you set about, promote and generate the internal environment as entrepreneurial to enable innovation in all its different forms to take hold and be seen as a learning environment people want to get involved with as they can readily identify with.
  • MLC Market Learning Competence- these give a clearer awareness on what and where to acquire from and then take the market lessons from. The key need is to orientate always towards, and generally get to the heart of, where innovation takes place- in the market place and with your customers, knowing their real needs and also figuring out their unmet ones also!
  • OC Organizational Learning- knowing the differences in the different ways of learning by linking the different intellectual capitals and combining the complementary assets needed to make them more dynamic.
  • RNE- Relationship & Networking Effects- the supporting and enhancing aspects of making greater connections, collaborations and exchanges so as to speed up the process of innovation, reduce or contain costs and enhance your understanding through these external relationships and getting closer to knowing where latent knowledge lies, to assist and share this internally for greater impact and result for all.

The make-up of each of these five elements has a significant set of activities to structure around but can deliver a clear set of benefits. These provide the necessary intensity of purpose.

What is the result of adopting the SCA framework?

ROII = Investment x Activity x Change (learning environment)/over Results Impact

It is applying this ROII that can measure this investment. The sustaining impact can be measured as continued investment across this framework pays off over time. I would argue this organizing framework is a good starting point to build your SCA.

IP of Paul Hobcraft at  www.AgilityInnovation.com

Email to find out more: paul@agilityinnovation.com