Corporate Innovation System - part 2

In a previous post, I’ve highlighted the necessary functions that should exist in a corporation in order to fulfill the innovation strategy. These functions could be implemented as stand alone departments or grouped together with other functions.

In this post, I will show what happens when there are missing functions of the Corporate Innovation. How it affects the results and the overall innovation performance of a company.

Even if it looks complicated, the most important functions are just four:

• Portfolio Management
• Incubation
• Acceleration
• Traction Control

Let's go through each function in the list and see what happens if it is missing.

Portfolio Management

There should be one common portfolio on top of the existing businesses and the new solutions. If a company works with different customer segments there might be several portfolios and portfolio managements, but each of them should comprise of the existing and the new business.

The portfolio management has two dimensions of responsibility — scope and time.

• In the scope dimension, it should define and build a coherent set of products that reinforce each other on the market.
• In the time dimension, it should define a portfolio evolution horizons with overlapping product life-cycles. The new products should replace the old ones in a controlled way, assuring no gaps in the revenue.

What happens without the Portfolio Management?

There is a natural disproportion of the size of the current products and the new solutions. Without a balancing function on top, the old products will not allow being replaced by new products until it is way too late.

Overlapping vs. delayed new product

The old Business Units will also try to block technological or market domains that might be threatening to them. This way the innovation functions will be limited to work only on marginal projects without real impact for the business. The Portfolio Management should provide the environment for disruptive solutions.

Without Portfolio Management on the Innovation side, there will be no independent control function. The Innovation projects will tend to run forever, without actual customer validation. Projects turn into zombies that no one can or want to stop. This leads to loss of money and time and demotivation of the teams. Every failed innovation project reinforces the corporate antibodies.

Providing a total separation between the core business and the innovation center leads to “Out of sight — out of heart” relationship. Which in short term kills the innovation and in longer term kills the core.

Incubation Function

The main role of the Incubation Function is to find customers and find a sustainable business model. Thus it is different from the R&D functions, whose role is Technology validation and exploration.

The Incubation function consists of the agile development team and market development team — following the Lean Startup Methodology. They work iteratively bringing MVPs to the customer, collecting feedback and refining the solution. The Incubation function should be building new business models.

What if don’t have it?

If the incubation function is missing its role gets fulfilled by the R&D and the Sales organizations. The problems with this setup are two.

• The R&D is usually designed for technology exploration and not for product development with changing requirements and
• The Sales teams cannot extract and validate the customer requirements for a non-existing product.

On top of that, they got installed a Product/Project Manager, dedicated to executing a project according to “The Plan”. So when the plan is executed the product gets to the market but surprisingly there is no customer for it.

How the Incubation Function can help — it will discover the potential inviability of the product earlier and adjust accordingly.

Acceleration Function

The role of the Acceleration Function is to “productize” the incubated solution.

Once a solution is proven with the customer on a small scale, all hacks and creative work should be transferred into repeatable, measurable processes that could be replicated in the big organization.

If it is missing the new product will be smashed in the machines of the big organization.

Traction control

One of the most important functions in the incubation phase. The role of the Traction Control is to provide guidance and transparency to the different activities with customers. It has to counteract the natural confirmation bias of the product owner. On the other hand, it should provide the management with a realistic view of the customer traction for the specific product.

Without the traction control:

• The product owner will be focused mostly on positive / vanity metrics of progress.
• The management will have a hard time challenging the metrics and get a real view of the development.

All these functions could be implemented in different ways in an organization. The goal is to manage the natural forces in existing organizations.

I will be happy to get your feedback and comments!

You can find more articles about corporate innovation here.