The importance of structuring innovation

Today, there’s only one real constant we can rely on, and that’s change. The only way that companies can stay relevant is by adapting to the shifts that take place in their industries — or by causing the shifts themselves. This requires innovation.

To stay ahead of the game, businesses need to constantly uncover new ways to deliver value to their customers, whether that’s evolving their existing products and services, or reaching out to new audiences with an alternative offering. And as the world around you continues to change, it’s vital for your organization to be able to innovate systematically, at a rapid pace that meets the evolving needs of your customers.

Getting this right requires structure and planning, concepts that may seem at odds with the big-sky ideas required to innovate. In this post, we’ll talk about the importance of structure and the role it plays in building a successful innovation strategy.

Innovation happens at three levels

Working with customers, based on the 3 horizons of growth framework by McKinsey, we see three levels of doing innovation.

• Innovation on Earth (Horizon 1): This is where you look at your existing product and adapt it to align with the changes taking place in your industry.
• Innovation towards Moon (Horizon 2): At this stage, your teams are finding or creating value for new customers OR creating new value for existing customers.
• Innovation towards Mars (Horizon 3): Here, you’re creating far-reaching visions that go well beyond the current scope of your current business model.

These three horizons fit in the “Search/Execution” model of innovation, with Moon and Mars living in the “Search” realm, and Earth in or close to the “Execution” one.

Regardless of where you’re focusing your innovation efforts, each horizon should have your customers and their needs at its core. The other must-have feature? Structural elements that ensure your innovation efforts are intentional and designed to add value.

Structure is the often-ignored key to innovation

It should never be a coincidence or a surprise when innovation happens at an organization. In fact, we believe that innovation needs to take place within a set of clearly defined parameters, supported by robust governance and measurement against metrics — interlinked with processes.

In the past, companies that already had a place in their industry would wait until new disruptors came along to make changes. They would look to these newer companies as proof of concepts for what could be and then, only once the model proved itself to be successful, would they look into offering something similar. That’s no longer enough. Instead, companies need to be agile and proactive, identifying the changes before they happen, and bringing innovation up the ranks and into the boardroom.

But that requires structure. Organizations that have come to this realization have started by introducing innovation into their org charts: we’ve seen customers hire innovation leaders and build up innovation departments. These leaders and teams are critical for developing frameworks, processes, and methodologies that ensure innovation projects are consistent in approach throughout the organization. They also ensure that there are open lines of communication across teams, to drive adoption, ensure a smoother handover process, and to encourage collaboration while also mitigating redundancies and inefficiencies.

The biggest challenge companies face as they try to create a framework around their innovation efforts is making sure they get the right people in the room. This means both finding the right decision makers and ideators, as well as the individuals that can execute on those ideas once they’re formulated — and are able to deal with uncertainty. You also need people that can communicate those ideas effectively to the rest of the organization — whether that’s leadership or other business units — ensuring that there’s buy-in at every step of the way.

As you start to add structure to your innovation equation, ask yourself the following questions. How are you innovating within your current business model? How are you keeping track of that innovation’s progress, if at all? Who’s responsible and accountable for your innovation projects? These are all questions that your structures and frameworks should help answer.

Reshaping innovation

To be a disruptive force in your industry, you need more than just big ideas. Instead, establishing structures that tangibly connect the dots between your innovation efforts and your business’ strategic vision will help your team uncover value and new opportunities with purpose.

In the next post in this series, we’ll introduce our four strategies for structuring search in innovation. We’re excited to share our thoughts and offer up examples for what these approaches look like in practice. Stay tuned!

Meanwhile, if you’d like to learn more about how we help our customers introduce structure into their innovation initiatives, get in touch.

Originally published at https://www.businessmodelsinc.com on September 22, 2021.