An innovation strategy can be the difference between an organisation that peaks then flounders (Toys R Us, Nokia, Kodak) and an iconic organisation with sustained growth and longevity (Apple, Netflix, Virgin). One essential part of your innovation strategy is your innovation portfolio, which outlines how your resources will be spent around innovation.
Our 3 Types of Innovation infographic demonstrates how to disperse efforts in your innovation portfolio using the 70-20-10 rule.
To demonstrate, imagine it’s 1885 and there are two candle-making companies called ‘Let There Be Light’ and ‘Light in the Dark.’ Whilst both companies are passionate about candles, ‘Let there be Light’ recognises that their user wants candles for their light-making properties, whereas, Light in the Dark are steadfast about creating quality wax and wick combinations.
Incremental innovation is the small improvements made to existing products, services, processes or methods. For both these candle-making companies, incremental innovations include things like changes to colour, burn time, tweaks to the manufacturing process, travel tins, glass jars, natural changes to height and width.
Let There Be Light, spend approximately 70% of the companies’ innovation efforts on incremental improvements and generate 10% ROI or business growth.
Light in the Dark, use 100% of their innovation efforts on incremental improvements and also generate 10% ROI or business growth..
Adjacent innovation takes place in a market that already exists but you don’t serve, using a technology you don’t use or leveraging something you are already doing into a completely new space. At Let There Be Light, while there is a high demand for their candles, they recognise they’re on to something with this light-producing business.
Their innovation efforts lead them to want to create light that won’t blow out in the wind, won’t burn the house down if knocked over and won’t need replacing every 20 hours. The innovation team at Let There Be Light spend 20% of their innovation efforts working to determine a light source to meet the changing market, changing technology and changing customer needs.
Thinking creatively, they come up with lanterns. Their innovation efforts in this space focus on alternative fuels, controllable brightness and increased safety.
Light in the Dark continue to sell candles, but demand diminishes as people start buying lanterns.
Radical innovation, also known as transformational innovation, is about cracking into an entirely new market or technology. The innovation team at Let There Be Light are encouraged to dedicate 10% of their time to thinking radically about ways to make light.
As they are customer obsessed and focussed on solving the real problems of their users they seek to create something that is safe, doesn’t set the house on fire if it’s knocked over or release toxic chemicals. Some bright spark invents the light bulb that completely reinvents the light-yielding world as we know it.
During these creative times the motivated team invent vacuum technology, new energy sources and new manufacturing techniques. Few organisations commit resources or take risks that allow for radical innovation to flourish but those who do reap the rewards. The return on investment for this type of innovation is 70%.
Light in the Dark still sell candles but they are about to be disrupted by Let There Be Light who have used their innovation strategy to diversify into light bulb manufacturing.
Embracing radical innovation encourages employees to thrive in a collaborative environment, nurtures their creative capabilities and positions the company for exponential growth. However, encouraging employees to spend 100% of their time, or even 50% on radical transformations is not advisable. The risk exposure at the radical level is much higher, so don’t place all your eggs in the one basket. Your portfolio should be a balance of quick wins and transformative opportunities to help balance motivation and creativity with risk tolerance and resources.
Don’t want to be Left in the Dark? Want to know more about creating an Innovation Strategy that motivates your teams to generate, design, develop and deliver great ideas?
Book your place at Innovation Strategy - The One Day Workshop, Thursday, September 6 2018.