Innovation as an Interdependent System
Aaron: “That’s great. Let’s dive into interdependent systems. I’ve been reading some of your blog posts and other material that you’ve got out in the world. You talk a lot about innovation as an interdependent system. Maybe a little bit of definition to kick things off. What does that mean to you?”
Noel: “I’ve noticed working with companies—large companies mostly—that when they try to improve their innovation effectiveness, they might take on a design thinking initiative, or a lean innovation initiative with growth as the objective, or just improving their core new product development process. What I’ve noticed is there is a lot of initial excitement and after a lot of hard work they do see improvement, but it plateaus over time. In some cases, companies will even backslide.
The promise of these initiatives don’t really live up to the expectations or the goals that are being set, so I tried to think about why that is. What I’ve learned over the years is that you really need to do more than just take on one element of innovation. What I mean by that, and what I’ve come up with as a result, is a framework for innovation as a system. There’s a lot of highly interdependent moving pieces in the innovation engine. For example, element is your core (horizon 1) business, and there’s the processes, the people, the tools, and the mechanisms to improve your ability to deliver new products over and over again, and then there’s a second element, new growth innovation (horizon 2/3). In recent years, a lot of companies are investing to improve their growth innovation to bring new sources of growth. That’s where design thinking and lead startup come in. These two elements, core and new growth innovation, represent the middle layer of this framework I’ve put together. When companies are taking those elements on, they might be getting some improvement, but it only goes so far unless you think about some other elements of this innovation system, like portfolio management.
How are we making sure that we have a balanced portfolio of both near-term core and long-term improvements to make up our core or base business product portfolio? At the same time, we’re also making decisions to invest in new sources of growth. Most companies don’t have unlimited resources to allocate to both categories, so that’s where portfolio management comes into play.“
How do we have a balanced portfolio, and make sure that we are not saying yes to too much, and our throughput doesn’t suffer because we’re loading up that pipeline with too many projects?
What are some other elements in this framework?
Noel: “Portfolio management is a discipline that sits in that layer between strategy and execution. Strategy is another important layer. Where are we going to play and how are we going to win with innovation? I view the portfolio management layer as the link between strategy and execution. These three elements, innovation strategy, portfolio management, and core/new growth innovation, are the center of the model.
In recent years, more and more companies are going outside of their four walls, and that’s where open innovation comes in. Co-developing or co-creating new products or new business models with startups universities. Co-development represents another key element in this system. Finally, all of this is enabled by tools, a culture, and incentive systems that drive the right behaviors. I came up with this framework and I call it an interdependent system because for each element that I just named, you need those other elements to work together, in concert, because they’re so reliant on one another. They’re operation is highly integrated.
Maximum benefit comes when all of these elements are working together. You can improve one of those six elements I just mentioned, but if you don’t work on the other ones, you limit your effectiveness. You’re only going to get a fraction of the value. That’s what I mean about integration. It’s like one plus one equals more than two. You really need to address all of these different moving parts in order to get the results that you’re looking for. It’s hard to describe this in words” (a graphic of the interdependent system is available for download on Noel’s LinkedIn page).
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About Our Guest:
Noel is a corporate advisor, researcher, and writer on innovation effectiveness. His experience includes senior-level corporate roles, new venture creation, and consulting. He is widely recognized for bringing practical and applicable approaches to companies looking to accelerate growth from innovation. Noel has worked extensively in the areas of innovation strategy, business model design, lean innovation, and product development execution.