Innovate May 2018

Stacked Innovation


Written By: David Whitney

Innovation comes in many shapes, sizes, flavors and types. I am intrigued by how innovation is conceived and executed, and my curiosity extends beyond what inputs organizations use and what innovative outcomes they produce. Around the world today, the practice of “stacking” innovation is applied more frequently by organizations seeking to increase the probability of producing successful innovations.

The innovation stack reflects a strategic method developed at Johns Hopkins University. Inspired by the term “software stack” in software development, the Johns Hopkins team designed a four-step hierarchy in which each layer in a stack works in tandem with the others. When properly designed and implemented, an innovation stack helps organizations develop new commercially successful products and services in a conscious, consistent, purposeful and — hopefully — profitable way.

The innovation stack involves four types of innovation. The innovation types are operational, product/service, strategic and management. Each type factors into how — and why — innovation contributes to the organization’s operational success and financial performance. If the innovation types were quantified and arranged from top to bottom depending on the amount of value created, the higher layers in an innovation stack would reflect greater value; this ranking by value traces back to how much the innovation type contributes to the organization’s competitive advantage and its competitive defensibility.

All layers of an innovation stack contribute value. However, certain layers are more valuable than others, which is why management innovation sits at the top of the stack. Understanding why this is so helps leaders trace the steps necessary to commit their organizations to innovation’s processes and practices.

At the base of the stack is operational innovation. In today’s global economy, the world grows flatter by the day and organizations are faced with increasingly competitive situations. In order to even survive — let alone thrive — organizations must maintain a solid foundation of operational innovation. Operational innovation refers to an organization’s ability to make incremental improvements to the processes and practices it performs routinely. Without fulfilling this minimum standard of operational innovation, organizations are hard-pressed to survive in today’s world.

Operational innovation is not solely limited to doing things new and differently. Instead, it encompasses whatever can be done to help organizations best their competition. It is usually not protected by trademarks or patents, and it is often easily copied and, increasingly, outsourced. However operational innovation can have a big impact on an organization’s operational and financial performance as long as the approach is comprehensive and consistent.

Next in line in the innovation stack is product/service innovation. Often, organizations pursue this type of innovation in order to boost short-term results (sales increases, productivity improvements, etc.) while also attempting to reduce or prevent product obsolescence, keep service offerings relevant, capitalize on opportunities and penetrate emerging markets.

An effective way to succeed at product/service innovation is to identify and solve problems. I strongly believe that problem-solving solutions have the best chance of becoming successful commercialized innovations. To do so, one must first start by accurately identifying the problem; this identification step is followed by performing however much research is necessary to prove the problem is real. If evidence proves the problem is real, the next step is to determine that a strong enough demand exists from customers (users) who are willing to pay for the organization’s proposed innovative solution.

Most often, the cheapest, quickest and most effective way to achieve product/service innovation is via proof-of-concept methods. Many organizations use proof-of-concept methods when innovating at the product/service level because they usually do not interfere with current operations. And, proof-of-concept methods are often robust and flexible enough to produce the feedback decision-makers need to evaluate both the viability and scalability of proposed innovative solutions. To be effective, the organization’s proof-of-concept “platform” must be able to test multiple scenarios (e.g., customer segments) and then evaluate — and rank order — the best problem-solving solution. This is a critical component in the innovation process; when organizations use proof-of-concept methods, feedback generated by the fast and flexible strategy produces the information and insight key decision-makers need to make informed decisions.

Next up in the innovation stack is strategic innovation. An organization’s ability to think, plan and act in ways that are different and unique aptly describes strategic innovation. Regardless of what an organization does or how it performs, strategic innovation calls for the design (or redesign) of the strategy that guides the organization’s mission, defines its operations and sharpens its focus. The best strategic innovation practices take into account how best to maintain — while also strengthening and leveraging — the organization’s competitive edge and its unique advantage.

Once defined, strategic innovation is then measured for its effectiveness. The most common measures of an organization’s ability to execute its strategy look at revenues, sales units, operating expenses and profits. Because of the complexities involved in implementing and executing strategic innovation, an organization’s senior leaders often look for evidence to affirm or refute whether or not their strategy is working. They also use strategic innovation to identify growth opportunities (whether breakthrough or incremental) while seeking data that can be used to improve the nature, quality and speed of their decisions.

And finally, at the top of the stack is management innovation. Management’s performance, its attitudes, how it is viewed, and how it communicates internally and externally all contribute to what degree of effectiveness the organization achieves. Organizations that excel at management innovation encourage leaders to think and act differently; these organizations also give leaders the freedom and flexibility to make decisions without being hindered by bureaucracies or criticisms for making decisions or taking action. I call this the “ask for forgiveness, not permission” philosophy on running an organization that is proficient at management innovation.

When executed correctly from the top down, management innovation transforms an organization. When executed effectively, management innovation sets the tone for how an organization attracts and deploys talent, how it decides what resources are allocated and how it determines the way leadership designs, implements and executes
its strategic plan.

Another factor contributing to management innovation’s importance and value is the difficulty involved in copying or replicating it. That’s because management innovation is people-centric and situation-specific; it reveals how people perform when faced with different situations. Those performances greatly determine whether or not organizations succeed or fail. I believe the phrase “different horses for different courses” suitably describes the unique nature and role of management innovation. For example, I have witnessed an excellent management team produce a very successful innovation from a so-so innovative concept and have also watched in dismay as a terrible management team expertly killed an outstanding innovative solution.

In summary, the innovation stack’s four layers serve as a platform for conceiving and launching innovations. Most organizations have an innovation stack comparable to the one I described, which is why I am bullish about the concept that aligns associated innovation types in an interconnected framework.

 

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David Whitney writes about innovation and entrepreneurship and consults with companies on all things related to innovation and entrepreneurship. David is an international speaker and has taught courses on innovation and entrepreneurship in both college classrooms and corporate boardrooms around the world. Whitney serves as Innovator- in-Residence at LeadingAgile Innovation Labs. In this role, David applies his operational experience and subject matter expertise to help LeadingAgile’s clients and strategic partners form and operate entrepreneurially minded teams. These teams are tasked with producing and launching problem- solving, commercially viable innovative products and services.

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