Innovation Top or Flop

#futureproof- the newsletter around future readiness for companies! Here, Dr. Lysander Weiss regularly writes on current topics relating to strategic renewal, innovation and transformation of established companies on their way into the future. As an adjunct professor, senior research fellow and management consultant, the bestselling author bridges the gap between theory and practice with fresh impulses to "rethink companies for the world of tomorrow's, today“.

Whats the hype?

While in my last issue, we looked at strategic agility and its application through a portfolio management system, this is not the only method for innovation and #futureproof companies. Just the opposite: Every year, new tools and practices are coming up, promising to help companies to innovate their way to future growth. But it is hard to keep an overview and even harder to decide what is really working and what not.

That is why we take a broader look this time and use the current Gartner Hype Cycle of innovation management practices to reflect on the tops and flops for actual strategic renewal. Hopefully this will help you to better navigate the jungle of different innovation approaches and determine what really counts for the future readiness of companies and organizations!

The Hype Cycle

Anyone who is at least remotely involved with new technologies is probably already familiar with Gartner's hype cycle model . For various categories of technologies, the market research company regularly shows a graphical representation of their level of maturity in terms of their acceptance, applications and potential relevance for solving business problems. And that's not all: Gartner even wants to predict how a technology will develop over time by having all technologies go through the same five phases (see Figure 1).

• The Innovation Trigger is a technological breakthrough that does not yet have a proven commercial application
• The Peak of Inflated Expectations then describes a prematurely high expectation of the technology, which cannot yet be fulfilled by actual applicability
• In the Through of Disillusionment, interest wanes because the (premature) expectations have not been met and when experiments and implementations are not successful and further development costs money
• In the Slope of Enlightenment, however, more and more usable applications become apparent over time and suitable products come onto the market
• On the Plateau of Productivity, the technology is finally introduced in mass business with broad applicability and high relevance for clear use cases.

Gartner uses various market indicators to accurately depict the expected (perceived) value and maturity phase of a technology innovation. However, it can be questioned to what extent every technology actually goes through exactly these phases. Is the commercial benefit never clear at the beginning? Is there always media-fueled hype before the use cases are fully developed? And is the disillusionment after the hype always followed by the path to productive use? This is at least doubtful. The results of an empirical study show numerous inconsistencies in Gartner's reports over time, meaning that the model cannot be used to reliably estimate the future development of a technology. Likewise, the Economist found that based on the data from Gartner, the #hype cycle is actually a rarity. Only about a fifth of all observed technologies move from innovation along the hypecycle to widespread adoption. In contrast, many technologies become widely used without such a rollercoaster ride. Some also go from boom to bust, but do not come back. For instance, the Economist estimates that from all the forms of tech which fall into the trough of disillusionment, 60% do not rise again.

So we should refrain from thinking about the hype cycle as an automatism or general law for technology development. Nevertheless, the question of current "hype dynamics" can complement existing life cycle models such as technology readiness levels (TRL) and always invites reflection on whether a technology trend is actually relevant for one's own company - or whether it is just a hype. In line with this newsletter, the focus can be on the question of whether (and how) a technology can actually contribute to the future readiness of the company - for which the Gartner Hype Cycle is perhaps a suitable basis for discussion!

Innovation practices in the hype cycle

Interestingly, the concept of the Hype Cycle has also been applied to innovation practices by Gartner in recent years. Now it's getting a bit "meta", as the innovation practices may of course provide for the research or application of new technologies from the other Hype Cycles - but we shouldn't let that confuse us now. After all, like for technologies, the Innovation Hype Cycle is ultimately just an interesting basis for discussion to reflect on which innovation practices actually make a strategic contribution to the future readiness of your own company - and which are perhaps just "hype" after all. So let's take a look at the Innovation Hype Cycle 2024 (see Figure 2).

This first glance can be a little overwhelming, as it shows above all that there are a great many innovation methods. It seems that the holy grail for successful innovation has still not been found...?? If you want to find out more about each of these innovation practices, you can do so in the Gartner report - we would like to pick out only the most exciting aspects here and evaluate what is relevant in terms of developing future readiness from the perspective of company management.

A first look is taken at the question of what has changed compared to the previous year (see Figure 3). Some innovation practices no longer appear in 2024 because they have either reached full operational capability (e.g. innovation training, workshops, idea challenges) or are no longer relevant (e.g. corporate incubator, microinnovations, innovation intellectual property management). Some practices have also moved further along the curve and are thus getting closer to full operational capability, such as "Visual Collaboration Applications" (aka Miro), "Continuous Foresight" or "Virtual Innovation Labs". And, of course, some are new additions, e.g. Venture Client, Minimum Viable Innovation System, Inclusive Innovation - although you have to ask yourself why some of these are now being presented as new trends, even though they have been established for a long time (e.g. Lead User, Insight Collection, Effectuation).

But well, let's not get into too much detail here, because there are probably different opinions on how useful and established each innovation methodology is or is not. Due to the mix of tools, practices, methods, models, etc., they are difficult to compare anyway, so this discussion probably won't go very far. Nevertheless, the analysis allows us to take a very personal look at the tops and flops of current innovation practices!

Tops and Flops for Strategic Innovation

I never view innovation practices as an end in themselves, but always in terms of what really works for strategic innovation or can contribute to the future readiness of the company. Does a methodology help a company to better achieve its strategic goals with suitable solutions? I always investigate this question from a research and practical perspective so that I can provide a well-founded assessment. On this basis, I have defined three "tops and three flops" (see Figure 4).

Top 3

• Venture clienting: The venture client model is a specific form of corporate-startup partnership in which the company enters into an early-stage client relationship with a startup. This enables innovative solutions to be tested and implemented at an early stage as part of a proof of concept without having to invest in a startup with higher risk and less flexibility. At the same time, the startup receives initial sales and references and can still develop its business uninfluenced. The concept comes from practical experience and was developed at BMW in particular. It is currently widespread, particularly in German-speaking/European countries, and for good reason: by focusing on relevant problems or opportunities for the company and concretely applicable solutions, this model systematically delivers a countable contribution (cost savings or increased sales). Accordingly, it is also being researched further in theory, for example to show the organizational characteristics of corresponding venture client units (see Figure 5). However, research also shows the limitations of the model. For example, it is less suitable for more radical innovations, there is not always a suitable start-up solution, and own competitive advantages are hardly ever developed as they are only "bought in". Nevertheless, this innovation practice is ideal for quick, concrete innovation successes and therefore deserves to be included in the "hype cycle"!

• (Adaptive) Innovation Governance: The big leap from innovation governance to the "Slope of Enlightenment" is particularly pleasing, because in my practical experience, hardly any other methodology is as important for the overall success of strategic innovation in a company. In general, it describes all mechanisms that help to align innovation goals, make decisions transparently and allocate resources optimally. This governance system must be able to deal with the inherent uncertainty of innovation and be adaptive accordingly. In practice, we see a great demand for suitable governance systems that better align innovation activities with a strategic value contribution. We meet this demand with our agile portfolio management system , which has proven itself many times over (see Figure 6). The "OKRs for Innovation", which are still at an early stage of the hype cycle, are also used by some companies, but in our experience they are usually too complex to apply. In research, on the other hand, innovation portfolio management and innovation governance are still rather neglected, so that case studies such as our project with Schaeffler can still provide new insights here.

• (Minimum Viable) Innovation System: In general, companies are slowly coming to the realization that individual innovation practices are never the holy grail for the future readiness of the company, but that innovation with strategic value contribution must be realized as a whole system. This includes coordinated processes, management, skills, resources, etc., as I have described previous articles.

Even if it is worthwhile, the effort involved is naturally greater than with the isolated use of individual innovation practices. This is why the "Minimum Viable Innovation " proposed by innovation expert Scott D. Anthony is a good start, in which the most important components of an innovation management system are run through "on the job" within 90 days. Important aspects that we always use in practice are thus quickly set in motion, such as determining the "growth gap" to be filled by innovation, focusing on specific strategic focus areas, the targeted development and selection of strategic opportunities, streamlining the innovation portfolio and setting up a dedicated innovation team with a systematic approach (see Figure 7).

Flop 3

• Corporate Incubators: Corporate Incubators (and corporate accelerators can also be counted as such) are innovation vehicles that aim to create new start-ups within an established company or accelerate the creation of start-ups for an existing organization. Inspired by Silicon Valley, this was a trend for a number of years that never lived up to expectations and has therefore justifiably disappeared from the hype cycle. The idea of incubating start-ups as a large company, which function independently and still have enough traction to make a strategic contribution to the company, was a "numbers game" from the outset that could never work. We explained why this is the case in more detail in our 2022 book "the corporates strikes back".
• Lean Startup: Let's stay in Silicon Valley. The "Lean Startup" method developed by Stanford professor Steve Blank and Eric Ries has actually proven itself for the development of innovations. As with other agile methods, the focus here is on rapid testing and iteration rather than linear waterfall projects. Nevertheless, this innovation practice can be considered a flop, as evidenced by the fact that it has not advanced any further in the hype cycle. Even though certain aspects have been introduced in innovation development, it has been shown that large companies are not start-ups - and therefore often have to work with significantly more restrictions than startups on the "greenfield". This means that the methodology alone hardly ever leads to projects with a relevant strategic value contribution, but must always be supplemented by additional processes, interfaces and suitable governance, or embedded in a suitable innovation management system.
• Company Builder: Company builders have mushroomed in the last 10 years. As external service providers, they have effectively taken over the role of the failed corporate incubator and are now building new start-ups for established companies from the outside. Operationally, this usually works well, as experienced teams are at work here who can quickly develop and test new business models without major interference from typical restrictions in large companies. The fact that this innovation methodology is still at the very beginning of the hype cycle is therefore more due to a lack of strategic value contribution. Due to the strong separation from the company and the focus on the rapid development of individual ideas, the projects usually lack the strategic orientation and integration of the company in order to be able to scale with "unfair" advantages for the company in the end. However, if these points are addressed, it can still become a successful, systematic innovation practice, as we have shown in our research at HHL under the term "Strategic Corporate Venturing".

From innovation practices to strategic innovation

The discussion of selected methods shows that the hype cycle can certainly be used to gain an overview and consider which innovation practices might be a good fit for your own company. However, this also harbors the great danger of continuing to focus on individual innovation methods and hoping that these will make a major contribution to the future readiness of the company. It is better to take a holistic view of your own innovation capabilities. In practice, this is always our first starting point in order to be able to develop or supplement a suitable system. Here we use a specific set of five dynamic capabilities for strategic innovation, which we can easily query to obtain an initial analysis (see Figure 8).

The various innovation practices are then only a means to an end in order to strengthen or develop individual skills in a targeted manner, so that at best a holistic innovation management system is created in the end. Once such a foundation has been laid, new innovation practices and their progression through the hype cycle can then help to optimize and update the system again and again - without expecting individual innovation methods to be the perfect solution. Innovation with a strategic value contribution therefore always requires a systematic approach, which is why new innovation practices are welcome, but only if the framework conditions have already been established in the form of a basic innovation management system. Otherwise, it is always better to start with that first and ignore all the hype!

References

1. https://www.gartner.de/de/methoden/hype-cycle
2. https://www.bmc.com/blogs/gartner-hype-cycle/
3. https://www.sciencedirect.com/science/article/abs/pii/S0040162516300270
4. https://www.gartner.com/doc/reprints?id=1-2I3FT67F&ct=240716&st=sb&utm_campaign=Gartner-Hype-Cycle-Innovation-Practices-2024&utm_medium=email&_hsenc=p2ANqtz-8HIl5hVz2DGY9gNWFj7UpQJZP8GBULmvoHqOBIzZhX4xzNmIT5zyirvLmAS-qDVaDqenCUVRlSZ0Ay3_DmcEsxX5j-mYv0qqN5qPv5FRtbm4b_ws0&_hsmi=316897934&utm_content=316897934&utm_source=hs_automation
5. https://www.researchgate.net/profile/Lysander-Weiss/publication/371335951_Performing_Open_Innovation_through_Strategic_Venture_Clienting_A_Guiding_Principles_Framework/links/647f53afd702370600d81a71/Performing-Open-Innovation-through-Strategic-Venture-Clienting-A-Guiding-Principles-Framework.pdf
6. https://www.researchgate.net/profile/Lysander-Weiss/publication/368684837_Strategy_needs_agility_implementing_a_novel_agile_management_system_at_fast_pace/links/63f4fd11574950594531e038/Strategy-needs-agility-implementing-a-novel-agile-management-system-at-fast-pace.pdf
7. https://www.researchgate.net/profile/Lysander-Weiss/publication/371336060_Innovation-to-Business_Enhancing_the_Innovation_Management_System_of_Schaeffler/links/647f545ad702370600d81ac6/Innovation-to-Business-Enhancing-the-Innovation-Management-System-of-Schaeffler.pdf
8. https://newmanagement.haufe.de/strategie/unternehmensentwicklung-innovationssystem
9. https://hbr.org/2014/12/build-an-innovation-engine-in-90-days#:~:text=“Minimum%20viable%20innovation%20system”%20refers,developed%2C%20rewarded%2C%20and%20celebrated
10. https://www.vahlen.de/sauberschwarz-weiss-comeback-konzerne/product/20830431
11. https://onlinelibrary.wiley.com/doi/full/10.1111/caim.12553