How do you set up your innovation program?
If you are reading this article, you have probably already struggled with this question. Should you set an idea funnel first or hire a cloud/blockchain/artificial intelligence (AI) expert? Should you try to change the culture or develop an innovation strategy with financial goals?
You also know the startup mantras — fail fast, disrupt yourself, move fast and break things — but these don’t give you specific guidance on what to do tomorrow.
In this article, I’ll show you a simple framework of four elements for bootstrapping and describe the components and the flows between them. Hopefully, it will help you frame your innovation process and set expectations for your leadership.
The basic idea is to start with what you have and design a solution for today’s market. If you are currently building an innovation center, you probably have a lot of obsolete products and resources, but between them, you have some nuggets of gold. Use these nuggets as anchor points to build solutions for the current market. Once your innovation capabilities mature, you can expand your horizons to more advanced goals.
Here is what you need in the beginning:
These are the assets giving differentiation to your products which only you can provide. This is what they look like:
You need to identify strategic assets that will give you an unfair advantage. These could be patented activities and materials, know-how, excess capacity, surplus or exclusive suppliers. You need a non-trivial advantage that gives the innovation a better chance of succeeding in the market.
Those resources should be readily available in substantial quantities without the need for a new capital investment. In the ideal case, the new solution should only add the cost of materials. Make sure that these assets are still unique and not already commoditized.
Under Your Control
Make sure you have control over the asset. Once you prove its value, your competitors will quickly try to copy you. If you don’t have the excess capacity for the exploration phase, you can borrow from another vendor until the idea is validated, but be careful that your interests are protected.
Without a unique asset, your new product will be just as everyone else’s with a minimal chance of success. You will be competing against players with better knowledge of the market and faster execution. Every new product should be anchored to unique assets. In time, the new product can become a unique asset itself and be a base for future innovation. Look at how Amazon used their existing cloud to serve new needs or how Kindle connected existing books and readers.
You have to always develop or acquire new unique assets and gradually discard the commoditized ones.
In order to build the right product, you need to know what your customers are using right now, and what they perceive as better. You can use lean startup methodology or design thinking to validate the problem and get insights about unsatisfied expectations or increasing frustration from the current products or alternatives.
Without direct access to customers, your innovation department will be producing products that nobody needs.
It boils down to the interconnection between these two things — understanding what the customer values as better and having unique assets to provide a better solution.
The next thing you need is a team.
A Dedicated Team For Technology And Customer Development
Sometimes it is expected that innovation happens on its own — that it is everyone’s job, and if you have an idea you can go around the floor and convince people to help you.
That is not how it works.
If you expect to make an impact with your innovation efforts, you have to put the necessary ingredients in place. You need a team of curious and capable people with the explicit goal to understand the customer and transform your unique assets into a valuable product.
Access To The Market
Aside from the problem validation, the development team needs to validate the new solution directly with the customers. They don’t need the mediation of the sales teams until later on. There could be a seamless flow between the problem validation and the solution validation. The reason I am discussing them separately is that they could be performed by different parties.
If access to the market is not available, the whole innovation activity becomes a sandbox exercise that will lead to frustration and demoralization for the teams involved.
Sometimes you don’t have all the components up front — you might have the insights and then acquire the assets or have a shelf space and look for a product to put in, but you will need all of them at some point.
Of course, for your company, the unique asset could be the market access or the development team, and this will define the type of innovation you are looking for.
Engagement With Startups And Partners
These four pillars can help you clarify your engagement points with partners and startups. You can put clear boundaries on who brings what to the table.
Usually, the most valuable assets that a big company brings are the unique assets and the market channels. The customer insights and the teams can come from a partner or startup.
If a startup brings the unique asset, providing a long-term differentiation for your products, you might consider acquiring them. On the other hand, if the big company brings only the market channels, it is no longer a corporate innovation but a reseller contract.
I hope this simple framework gives you some insights on how to organize your innovation program.
This post was first published in Forbes.com