When we started studying the companies who have a declared strategic intent to build a breakthrough innovation capability, we saw companies who wanted BI but didn’t have enough good ideas. We saw companies with lots of great ideas that couldn’t get them built into businesses. They’d send them over to the business unit once the technology or concept was developed ‘enough,’ and then nothing happened. They just stalled.
We were asking ourselves, “What is a capability for breakthrough innovation, anyway?”As it turns out, there are three separate and distinct capabilities. How do we know? Because some companies had some, and some companies had others, but only 1 had all three of them. AND even that one didn’t have them tied together very well. We saw projects slip off the radar screen.
We believe that breakthrough innovation is about the three following capabilities: Discovery, Incubation and Acceleration.
The discovery capability involves activities that create, recognize, elaborate, and articulate opportunities for radical innovation. The skills needed are exploratory, conceptualization skills, both in terms of technical, scientific discovery and external hunting for opportunities. Discovery activities can include invention, but needn’t always.
While the vast majority of companies in our study invested in internally focused laboratory research , most also hunted inside and outside the company for ideas and opportunities, and licensed technologies or placed equity investments in small firms that hold promise.
We saw ‘alpha teams’ of idea generators…really creative, smart types who just pumped out idea after idea because they understood the wealth of scientific expertise resident in their company. We saw idea hunters who went out into business units and help workshops and idea jams. We saw “exploratory marketing’ teams within R&D groups. These were pairs (a technical person and a business person) who hunted outside the company,…indeed, across the globe, for opportunities.
One of our companies relied upon an informal network of external contractors to generate and develop wild ideas and inventions. This network was maintained and funded by a senior executive who elected not to bring them within the company for fear that their creativity would be stifled.
Discovery if about idea generation, opportunity recognition and opportunity elaboration. All of it. It’s definitely about R&D, but there’s more to it than that.
Incubation for generating business proposals
Whereas discovery competencies generate or recognize RI opportunities, the incubation competency involves activity that matures radical opportunities into business proposals. A business proposal is a working hypothesis about what the technology or business platform could enable in the market, what the market space will ultimately look like, and what the business model will be. Incubation is not complete until that proposal (or, more likely, a number of proposals, based on the initial discovery) has been tested in the market, with a working prototype, and first revenues are flowing in.
We’ve observed that the skills needed for incubation are experimentation skills. Experiments are conducted not only on the technical front, but, also for market learning, market creation and to test the business proposal’s match with the company’s strategic intent.
In most of the companies we studied, most projects entering into the incubation phase were filtered out when the experiments failed for one reason or another, due to the high uncertainty associated with what initially appeared to be a promising opportunity. One BI portfolio manager described his frustration at the ‘churn’ rate in the portfolio at the early phases of the projects, when they were moving from the idea phase to early technical and market experimentation. Still, he admitted how that was to be expected given the high level of innovativeness, and therefore risk, of the ideas.
It turns out the incubation is the hardest competency to develop and maintain in companies. It takes too long. We don’t train business students how to do it. Certainly not how to evaluate it. We call incubation “The Long and Winding Road.”
Acceleration and building the business
The third competency needed to have a full up breakthrough innovation capability is acceleration. Acceleration activities ramp up the fledgling business to a point where it can stand on its own relative to other business platforms in the division that’s eventually going to house the new business.. Whereas incubation reduces market and technical uncertainty through experimentation and learning, acceleration focuses on building a business to a level of some predictability in terms of sales and operations. As one Innovation Director told us:
“I need a landing zone for projects that the business unit does not feel comfortable with. If I transfer these projects too early, the business unit leadership lets them die. I need a place to grow them until they can compete with ongoing businesses in the current operating units for resources and attention.”
The skills needed are those required for managing high growth businesses. Acceleration involves exploitation rather than either exploration (which Discovery requires) or experimentation (which Incubation requires). The activities of acceleration include investing to build the business and its necessary infrastructure, focusing and responding to market leads and opportunities, and beginning to institute repeatable processes for typical business processes such as manufacturing and order delivery, customer contact and support. Acceleration involves turning early customer leads into a set of qualified customers and predictable sales forecasts. Similar to an independent start up firm in first stage growth, acceleration pursues top line revenue rather than bottom line profitability.