Strategic innovation and why the future comes in a ‘s’ shape

We humans, so much used to fairly linear growth in nature, seem to have a really hard time understanding non-linear growth. Then the Kodak, and after it, the Nokia disasters happened. Both companies, each one at their own time, became sitting ducks to growing competitive forces and accelerating market changes, as their offer and value proposition were helplessly advancing towards irrelevancy.

According to Guy Kawasaki, a potential cure for it can be not defining your position in the market by "what you do", but by "the benefits you provide". Let’s look at the ice industry and its evolution, from cutting ice blocks in the mountain, to ice factories, and then to home refrigerators, as a simplified example. Here, if a company defines itself as "we fridge water centrally and distribute it", it will stay forever in the ice factory "curve".

Drawing curves of fate: linear, sustaining and disrupting innovation

The ultimate market value and positioning of a given product, service or solution is defined by its comparative performance, the amount of value provided to and perceived by the user. We can define value propositions as the combination of technology and business model, forming a specific "paradigm". While the forces that drive advancement and progress within an industry, directly impacting those paradigms, are different forms of innovation, including linear/incremental, sustaining and disrupting innovation.?

The combination of these elements defines how and at what pace current s-curves are being drawn and when new ones irrupt in the market, defining the fate of the players and stakeholders involved in that particular industry.

• Incremental innovation comes from the critical mass and volume characteristics of corporations and established companies. It is built upon relatively small improvements on the current way of doing things, which keep raising the performance or value offered by a specific paradigm in a rather linear fashion.?
• Sustaining innovation happens when new possibilities in the current curve are unlocked by infusing current paradigms with touches of new horizontal technologies, usually positioning the company executing on it significantly above its competition. Such a competitive advantage tends to be sustainable only for a period of time before competitors catch up, or disruptive innovation kicks in. If you have not seen it coming, the irrelevancy clock starts ticking right there. Examples of sustaining innovation can be new heights in operational efficiency that allows reducing costs considerably, or improved technology that notably increases the performance of current features.
• Disrupting innovation basically makes irrelevant the preceding paradigm or s-curve by offering an exponential rise in the amount of value provided to the user. It generally goes beyond distinctly improving current features and capabilities, creating completely new ones nowhere found in the previous paradigm.

It can be argued that large corporates are masters of incremental innovation but potential preys of disrupting one, precisely because of the features that make them good at the incremental front. Sustaining innovation sits somewhere in between, occurring when sparks of those two forces find each other. On the other hand, startups tend to be masters of disrupting innovation, however, they usually lack the scale and resources needed to go as far as creating a whole new paradigm in a given industry or vertical.

This rationale highlights the importance for established companies of building effective collaboration frameworks between these two worlds to attain and sustain market leadership while keeping competitors and market irrelevancy at bay. Technology keeps raising in complexity, a fact that in turn demands for deep levels of specialization. The combination of both forces makes the prospects of effectively developing everything in-house not particularly feasible. Cost, time and risk factors underpin this reality, solidifying the need and the appeal of building external capabilities supported by strategic innovation partnerships.

The forces behind disruption and the impact of unfair advantages

The forces infusing sustaining and disrupting innovation usually take the form of horizontal technologies that are then applied to industry verticals, creating positive change that exponentially raises the amount of performance and value provided. Gartner's Tech Readiness Chart provides a good summary of those already relevant technologies and those on the way to becoming so, while depicturing, by comparing charts, how they evolve over time.

The capacity to identify those that are or could have the potential to be of particular relevance to a given industry, as well as understanding how they fit in and what the synergies for disruption could be, becomes essential. Combined with insights coming from market and strategic analysis, this seems to be a viable way to envision and shape new ideas, planting the seeds of sustaining and disrupting innovation.

To better understand the relevance of effectively interacting with such an ecosystem, some interesting insights can be extracted by looking at how these enabling technologies are developed and launched, usually in the form of startup companies.

It usually begins with an idea that gets conceptualized, the formation stage. After that, the project will evolve through full-time commitment and validation, where a minimum viable product is created to test that initial product-market fit, after which iterations and pivoting further polish the technology and solution. Passed that validation stage, scaling and growth are the next phases towards establishment, creating a well-rounded solution ready to be adopted, integrated or further scaled.????

Thought the entire process, a given startup and the technology being developed has been fueled with financial resources as varied as the funders' own resources, family & friends soft funding, startup competitions, startup grants, crowdfunding, accelerators, seed capital, loans, credits, business angels and venture capital. Most importantly, with each funding round and investment stage, the value proposition behind this new technology has been severely questioned and tested.????

The above's helps to illustrate the complexity and how resource intense the development of a new technology ready to be integrated into real market set-ups is. When building up open innovation capabilities, established organizations gain access to such a thoroughly polished outcome, in addition to being able to source it at pretty much global scale.

The formula of corporate labs and internal innovation is a great one and will stay relevant, but considering the ever-growing number of technologies coming up and continuously advancing with the capacity to severely impact your industry, it is not feasible, let alone cost-effective, trying to develop everything in-house.

Moving towards the strategic side of things, corporate-startup collaborations allows to jointly leverage and exploit what can be described as "unfair advantages". They can arise from the vast amount of knowledge that an established organization has on a particular market or vertical, combined with the piles of data they ideally possess. In many cases, this data is barely used or used in a number of highly specific and narrow ways. However, when looking at it from a startup perspective, new layers of value and even business models can be untapped.

In other cases, unfair advantages can come from the access to infrastructure that exponentially leverages the impact of a specific technology. It can also come from the access to specific customer niches and markets to be jointly disrupted.??????

In most cases, startups do not possess or have access to all these elements or in such depth. On the other hand, for corporates and established organisations, it can be quite challenging to envision and develop the required capabilities, culture and agility to leverage these external resources. The effective orchestration of both sides has the potential to spin off new value paradigms in the market, new s-curves.?

A framework to envision and build the future

Dancing in between both worlds, early on we mentioned the benefits of collaborating with "strategic innovation partners". An approach created to walk the way with both established companies and startups, supporting ventures and shaping together the stages of the so-called "strategic innovation framework".

STRATEGY

As introduced before, for a partnership to reach its highest potential it should be delineated first from a strategic viewpoint. A strategic approach toward innovation means starting off by clearly defining the vision and goal to be attained, not just building or participating in ‘innovation theaters’. Attaining and/or sustaining market leadership is the macro level goal, thus a good question to be answered can be 'what will take our value proposition and/or operations to a whole new level?'.

In this context, the 'Four actions framework' created by Chan Kim and Renée Mauborgne and introduced in their book ‘Blue Ocean Strategy’, helps to jump-start the thinking process exploring different directions.

In order to find insights that help to answer the above's question, market and user’s trends, the industry’s technological edge, competitors’ position in the market and current capabilities to potentially be leveraged should be analyzed.

TECHNOLOGY & CAPABILITIES

The insights coming from that strategic and market analysis are then crossed with a throughout evaluation of those upcoming horizontal technologies, shaping the vision of where to go and who to walk the path with. A route towards continued market leadership, delivering positive and multidimensional Return of Investment (ROI).

PARTNERSHIP STRUCTURING

With the above clearly defined, the next step goes down to how to properly structure the collaboration between both companies and the way forward. Experience has shown that three different levels are to be considered, depending on the complexity and degree of innovation involved, paired with the required capabilities to bring it into reality. The depth of the partnership, length of the project and amount of resources mobilized will vary accordingly.

Generally, incremental innovation can be attained internally. Sustaining innovation can be materialized by integrating ready available solutions that get enhanced by corporate-startup synergies. Finally, disruptive innovation tends to require further development of upcoming technologies applied to specific verticals, creating a new s-curve and value paradigm in the industry.?

EXECUTION

The execution phase involves carrying out the details of your project charter to subsequently develop, test, fine-tune and reevaluate the defined product or solution. Assigning clear responsibilities and accountabilities to team members, explaining the rationale and motivation behind what is being created to get buy-in from all the stakeholders involved, as well as being able to implement course corrections when needed in an agile manner are some key points to have in mind to foster success at this crucial stage.?

In the whole process and although always synchronized with CTOs, CIOs and Heads of Innovation and Partnerships, it is also important gearing up and work directly with business heads and units at the corporate side. Market and user insights are the cornerstone of the entire venture, and when it comes to execution and testing, business units are the players channeling it down to the user.???

A touch of magic and the three dimensions of a new solution

The entire process should be guided by a thorough analysis and understanding of those ROI figures expected to be generated by the project, this is something learnt first-hand . However, it never hurts allowing a little of free flow in the creative process to find some magic, to actually dare to go to that uncharted territory. Sometimes shoring up a chart before that magic can begin, can ruin part of that beautiful exploration stage and starting point of the innovation venture.

Great innovation occurs when a new value curve enters the market. Great innovation is unique and valuable, you might say 'innovative'. It sounds simple, but it so essential. When trying to answer the question 'how many times this thing will improve the current level of value offered in the industry?', usually y solid insights tend to come up.

Great innovation is also deep and intelligent, it rarely pops up in one’s mind out of nowhere. Nevertheless, idea seeds and insights can show up at any point, it is important to be listening. Great innovation is complete as well, which means that it should include and embrace all the stakeholders involved in it since conception.

Great innovation tends to be elegant too. When fully polished after MVP and pivoting stages, it has into consideration all user touch points giving that well rounded experience that sets apart this creation, solution or product.????

And last but not least, great innovation is empowering. It has the capability to enhance the user, to better equip that person to be the hero of their own story , whether in their professional or personal dimensions. Thinking about how they traverse their world every day and what tools and information they need to succeed in their journey.

Bringing everything together, it can be argued that great innovation gets shaped at the intersection of Technology, Business and Design.?

When communicating great innovation, brand positioning should be articulated around the problem that you're solving for the customer rather than just focusing on the benefits of your solution.

Positioning and branding ultimately comes down to what the consumer decides. Ship your MVP and then listen and evolve. Take your best shoot with positioning and branding, but when customers use your product, listen very carefully to them and what they say it actually is. Priceless insights when building the future of an industry and market.

A final take on governments and nations

It is said that the future of a nation is predicted on its ability to commerce. In todays world this ability is directly linked to a nation's capabilities to innovate and create highly competitive products and solutions in a fully globalized market.

Developing an ecosystem that fosters the growth of technology companies, the production of high value added products and services (high-technology exports) and that supports their reach and expansion into new markets will be cornerstone of economic prosperity.

Wrapping up

Some years behind now on this journey helping clients and partners to reach the future as quickly as possible. The strategic innovation partnership approach presented in this article has shown to be of positive impact when embracing new technologies and building new ventures. But overall, its success has been particularly predicated on close collaboration and strong mutual commitment to seeing things happening.

Cheers to the years to come of innovation and business growth!