One of the challenges encountered when helping corporations facilitate innovation is determining the best method to develop an idea. The method on how to turn an idea into a product, service, or internal improvement that leads to increased revenue, profits, or cost savings.
In a previous blog I discussed how to use the business model canvas and an Ansoff Matrix modified for Innovation Strategy to categorize an innovation.
There is a different Back End Innovation method you use for each of the categories, Core, Adjacent, and Transformational as defined in this Ansoff Matrix.
Organizations should have all the business capabilities (R&D, Sales, Marketing, Support, Distribution, etc. etc.) necessary to develop ideas in the Core category into Innovations. These ideas are often incremental revenue or cost savings, but they are also often low in cost and quick to implement. So these ideas are often great for building a base of success for an innovation program.
To be successful here the innovation program is trying to tap into these capabilities to develop ideas found in the innovation program. The innovation program should first understand the method by which product marketing (for products and services) and operations and IT (for process improvements) receive enhancement or feature requests from their current customer base. Once this process and way of working is understood, then the innovation team can craft a method to hand great ideas into these processes.
Ideas in the Adjacent category are ideas where there is some small set of business capabilities that need to be significantly modified or created. For example, imagine a hardware company decides to start licensing its software. Said company probably needs to modify the sales and support channels to handle the new product.
It is often difficult for the normal organization to directly develop these changed or new business capabilities because it does not have the resources or ways of working that support business capability development. In these cases an incubation method is a great way to develop the idea. An incubation method involves creating a dedicated cross-functional team that is empowered to prototype the new product or service. The goal of the incubation team is to mature and validate with customers a prototype so that it can be integrated back into the organization. There are many ways of doing this; I prefer a combination of design thinking to flesh out the needs of your customers and lean startup to rapidly prototype, learn, and pivot.
Ideas in the Transformational category are ideas that require significant business capability change. A good example would be a company with enterprise focused products trying to enter the consumer market. This requires significant changes to existing business capabilities.
Transformational ideas are usually very difficult to develop within an organization. The organization is built and rewarded for executing a set of current business capabilities and therefore it will resist transformational changes. Because of this it is often best to create a method for idea development that is outside the constraints of the organization. These methods often fall under the title of Mergers and Acquisitions. There are many ways these can be created which include spin-up, spin-out, spin-in, corporate venture, and eco-system development.
Does your company map ideas into the same categories? What methods does your company use for back end innovation? Tell us about it in the comments!