Alexander Osterwalder and the team at Strategizer published a small eBook chock-full of best practices on corporate innovation called From Innovation Theater to Growth Engine. Ahead of the book they also released a set of videos explaining some of the concepts. Strategizer is likely one of the top innovation consultants out there. They don’t build the innovations, but they do teach you how to find, vet, and manage a portfolio of innovative ideas.

Here are some items I think y’all might find valuable:

Some sobering statistics

Over 75% of executives report that innovation is a top three priority at their companies.

But…

Only 20% of executives indicate that their companies are ready to innovate at scale.

You’re not as good at innovation as you think

New global, low-cost competitors are popping up in more and more sectors. Every year billions of venture capital dollars flow into startups with disruptive innovations. Private equity firms expect their new portfolio companies to maintain high growth rates even though adding headcount is getting harder and harder. In this world, “we’re good at innovation, we launched that app last year…” doesn’t cut it. One need simply look at Kodak, Nokia, Yahoo, Blackberry, Blockbuster…

Do you want to becoming irrelevant efficiently or grow for decades?

You can’t use the old metrics

The right metrics to evaluate innovations are different from the metrics to evaluate normal expansion. If you run a global network of widget factories then presumably you know a lot about the costs, risks, and expected revenue of opening a new widget factory. Anyone proposing the new factory would rightly be expected to provide detailed Return On Investment (ROI) projections backed by a lot of data. If, however, someone proposed creating software to allow clients to design widgets and model supply chain impacts of different designs… no one has any idea yet if the thing even has potential! Leaders need to think more like venture capitalists and less like bankers by looking for momentum, not revenue.

Innovation needs to be continuous

Instead of innovation, let’s talk about business functions everyone is comfortable with: quality & hiring. Do we want to increase the quality of our products today only, or do we need to ensure they are forever getting better? Do we want to hire a bunch of great people today and to heck with who we hire next year, or do we need to attract & retain a steady pipeline of killer talent? Will all of that happen magically on its own or will it take continuous, concerted effort?

So too with innovation. A big innovation push, or even the launch of an amazing new product or two is a short-term fix. The only way to truly succeed is to ensure you have the people, culture, and processes to create a continuous pipeline of innovations.

3 types of innovaion

1. Efficiency: focuses on improving operational excellence. The business model itself doesn’t change in any meaningful way. Typical examples include technologies that improve operations, distribution or processes in general. It may also include process innovations that help make an organization more effective. This kind of innovation is the easiest for companies to embrace, important to do, but it is table stakes for staying alive in a competitive global market.
2. Sustaining: explores opportunities that build on top of a company’s existing business model. The goal here is to strengthen the company and make it more adaptive. Sustaining innovations are typically about new products and services for existing customers. They may also involve new distribution channels, production technologies, or geographical expansion.
3. Transformative: creates substantial growth from radically new opportunities. This involves exploring new value propositions or business models. Typically these are outside of a company’s comfort zone. Transformative innovation is critical for a company to maintain high growth rates and rapid valuation growth.

A few pearls of wisdom

• How good are you at killing ideas? If startup founders refuse to kill a bad idea, they eventually run out of money. However, in corporate innovation, there is a much stronger tendency to keep funding something once it is up and running. This makes killing bad ideas much harder! Make sure you have clear “kill criteria” at the start of a project and regularly hold yourselves to account. Google published some great tips on how to do this well.
• Create tangible results, not “innovation theater”.
  • Ensure the entire organization understands why you are innovating and the incentive changes you’ve put in place to make it happen VS simply giving some senior leaders permission to “innovate” without support.
  • Leaders see their work as impacting the entire organization VS fighting to defend their territory.
  • Innovation teams focus on testing value propositions with real users/customers VS ideation and building ideas that the team thinks are great.
  • Give prestige and resources to innovators VS asking people to add it to their existing ToDo list without reward.
  • Create Psychological Safety vs punishing people for failure.

Enjoying this? Read the ebook.