A framework for value creation: your innovation portfolio needs strategic metrics
The ability to innovate has become a critical piece of the puzzle when determining a business’ success. Without innovation, a company lacks agility and creativity — making it difficult to respond to the evolving trends within the business landscape. But getting innovation right requires more than just big, bold ideas for generating new value — it also requires structure.
To ensure your innovation portfolio is effective, you must have clear, specific metrics that tie back to your forward-looking business strategy. Here’s a glimpse at what that looks like.
Attaining the right innovation framework
Around the world, leaders are talking about the need to innovate. But what is innovation, exactly? To us, it means the search for new value — and this search can happen across three different horizons:
1. Incremental new value: Value is uncovered within the boundaries of your existing business model, with a focus on your existing customers.
2. Adjacent new value: Focussing on new value to existing customers or existing value to new customers, always related to your current business model.
3. Disruptive new value: New value that is totally different from the value you deliver today, or even to how value is delivered in today’s industry.
Regardless of which horizon you’re exploring, it’s crucial to have a value driven strategy and a business (innovation) portfolio driving that strategy. But that’s not enough. You need the right capabilities and mindsets to best equip your teams to find the new value, and capitalise on that opportunity. This comes down to two key elements.
To start, you need an innovation DNA that permeates your business, one that features a value-driven mindset promoted by leaders and brings your people together under shared goals and objectives. The second element is structure. To innovate effectively, you need the right processes, metrics, governance, skills and assigned resources.
The role of governance in innovation
Adding frameworks and processes to innovation may sound like a counterintuitive practice — but you’d be wrong to think that. With the right structures and governance in place, it’s easier to set a consistent approach for innovation, with measurable components that allow your teams to measure tangible success.
Establishing a framework that connects the dots between your innovation efforts and your business’ strategic vision will go a long way towards helping your team uncover value and new opportunities with purpose.
Think of it as a pyramid. At the top, you have a strategic vision for the role you want your company to play in your industry as it evolves. This is supported by a robust innovation strategy that lays out the choices and steps your teams need to take to attain that vision. Under that: tangible objectives and metrics focused on the corporate value, market value and financial value. And the metric on measuring your efficiency of innovation.
Then, as you start measuring your performance against those metrics, you have a framework for linking any of your team’s innovative contributions in the portfolio to the broader strategic elements and the vision itself. This is important for a number of reasons, not least of which is ensuring your teams and business units buy into your business’ roadmap for the future — a priceless win.
Curious to understand more about what this innovation framework could look like in practice at your organisation? Get in touch and let’s have that conversation.
Originally published at https://www.businessmodelsinc.com on June 16, 2021.
