Innovation Reconsidered a White Paper (2015)

Copyright 2015 - Innovative Ventures, all rights reserved
Innovation Reconsidered
The transformation to Adjunct Innovation practices
Abstract
The challenges we face as a nation in tackling
effective innovation practices are many. These
challenges, however, quickly transform
themselves into opportunity when applied to
specific disciplines such as healthcare, finance,
education, and of course, commerce.
Few places illustrate the rewards of effective
innovation better than the multi-billion dollar
retail market where score is kept by the
generation of revenue from successful
products. This same market is, in contrast, a
glaring example of the difficulties in finding and
deploying successful innovation models.
U.S. retailers are perhaps best seen as examples
of Joseph Schumpeter's 1942 [Schumpeter
1942] Creative Destruction model, where the
failure of old approaches fuels the motivation
for change and shapes the direction of new
innovation paths.
For a retailer, this fork in the road of new
opportunity offers the choice of different over
more of the same.
The place we find ourselves - as we look back
through previous innovation models, such as
the Closed Innovation programs of the 1990's
and Open Innovation programs of the 2000's,

force us to come face-to-face with the frailty of
previous approaches.
To have felt the intangible omnipresent culture
of modern day corporate life is to understand
first hand why these programs never delivered
on their lofty promise of synergistic innovation.
This understanding is in fact, the first step in
formulating a working innovation model that
takes us into the future.
Both Closed Innovation, and its later cousin
Open Innovation, were hinged to the
framework of internally-generated retailer
innovation programs where these same
corporate cultures and a lack of innovative
volume ultimately retarded both their
processes and results.
This paper submits retail innovation programs
should not be conducted solely within the walls
of the conference room, or between corporate
partners, but also outside the walls of corporate
America.
This Adjunct approach allows the transfer of
innovation from the heartland to the store
using well defined repeatable systems.
Innovation programs are intuitively more
effective when developed in an adjunct manner
and managed under the hierarchy of an internal
corporate authority.
In the current retail environment effective
innovation programs that hope to produce a
consistent volume and variety of profitable new
product should include a "bolt on" component
to their existing innovation structure.
In doing so, culturally-affected innovation
programs of the past give way to processes that
harness the creative power of the citizenry by
employing internally-controlled, externally-
executed, and goal-focused Adjunct Innovation
platforms.
The Paradigm of Innovation
Few paradigms have as many definitions or
popular beliefs as the paradigm of innovation.
Innovation to one may not constitute
innovation to another, and although the word
itself has many meanings, consistency can be
found in its ever-changing applications.
Closed Innovation, Open Innovation, and now
the emergence of Adjunct Innovation are, at
their core, different manifestations of the same
paradigm. None right or wrong - all three
simply reflective of an openness to innovation
that does not resist change, but embraces it.
The adoption of these ever-changing paradigms
on the part of the retailer requires a willingness
to exercise a new mindset - one that takes them
past traditional methods of new product
acquisition and into areas not yet thoroughly
explored.
To build upon the innovation techniques
previously expressed in popular innovation

paradigms, and reach the truly fertile ground of
Adjunct Innovation, requires a shift in the
paradigm once more that embrace bolt-on
structures designed to effectively harness the
almost limitless creative power outside the
organization.
This change in philosophy represents the first
step in the formation of a true retail innovation
ecosystem that provides a lasting competitive
advantage through new product volume and
variety.
The chart below illustrates the differences in
approach to the three widely accepted
innovation paradigms.
Closed Innovation Open Innovation Adjunct Innovation
All the smartest people in the
industry work for us so all we
need to do is get them to create.
Not all the smart people in the
industry work for us so we need to
identify our smart people and then
augment them with other smart
people outside the company.
Although we have some smart
people, they will never match
the creative power, scope and
volume of work the individual
inventors of the world can
produce.
To profit from R&D, we must
discover it, develop it, and ship it
ourselves.
Mixing external R&D and internal
R&D still allows us to claim some
portion of the value created.
External Innovation programs
managed by internal
innovation teams can expand
and accelerate the innovation
value created
If we create the most and the
best ideas in the industry, we
will win.
If we make the best use of internal
and external ideas, we will win.
If our customers bring us the
solutions and ask us to sell
them back those solutions in
the form of products, we win.
We should control our IP, so that
our competitors don't profit
from our ideas.
We should profit from others' use of
our IP, and we should buy others' IP
whenever it advances our business
model.
We should be open to both
owning and renting the IP
depending on how it advances
our business model.
We can keep all our creativity
behind closed doors and use it
when we need it
We can sell our excess creativity to
other companies and profit from our
involvement
We can open a pipeline of
innovative new products, sell
what we want and broker the
products outside our core.
The Retail Innovation Ecosystem
It is a widely accepted fact that for most
retailers the product innovation engine is driven
by suppliers and marginal consumer input.
While these innovation efforts are focused on
improving product features or performance,
research has shown that often the highest
returns from innovation come from business
models that include a more active participation
of the user.

In fact today, individual product success is often
characterized by how well innovation
ecosystems synthesize the diverse contributions
that define the consumer-problem-consumer
cycle.
Creativity beyond organizational boundaries
that recognizes the problem solving contribution
of the consumer is essential, as new product
innovation by retailers simply cannot be
conducted in isolation.
In the future, the majority of new products and
ideas will originate from an innovation
ecosystem maintained within, but operating
largely outside the organization.
Like all ecosystems, optimum results for an
innovation ecosystem are achieved through
synergistic interactions and the vigilance of
proper care provided by an internal champion.
While it is possible for an internal innovation
ecosystem to function and produce a result
alone, it is more probable that when properly
balanced, an internal and external ecosystem
will perform at a level of harmonious interaction
superior to that of the internal system alone.
Although separate and somewhat different in
their construction, two well-cultivated
innovation ecosystems will always seek
equilibrium that reflects the organization's
innovation focus and product acquisition goals.
In this model, innovation must always be
defined, guided, and disciplined by the internal
structure, and executed by the external
structure.
The bolt-on nature of the internal/external
relationship allows external ecosystems to
provide nourishment to the internal ecosystem
and ultimately to the organization itself by
adopting a consumer-initiated product
innovation philosophy that reflects the Plan-
Plant- Harvest methodology.
Consumer-Initiated Product Innovation
In its broadest and most used definition,
consumer-centric innovation is nothing more
than creating growth by attempting to
understand your consumer’s needs. While
consumer-initiated innovation is a process of
consumer problem solving.
Understanding how to properly apply consumer-
initiated innovation ideologies to the
development of new retail products, requires us
to acknowledge the product is simply a wrapper
for the solution being offered by the retailer.
This realization creates a circular relationship
between the customer experiencing the
problems and retailers who provide structured
processes for obtaining solutions.
While retailers and their suppliers generally
provide a contiguous path for selected solutions,
their ability to accurately predict the consumer-
need will never match that of the consumer
themselves.
Therefore, the strongest solutions, and the
products that wrap them, come not from the
retailer or their suppliers, but from the retailer's
customer. The retailer need only develop the
innovative ecosystem that encourages the
process.

In fact-a logical argument can be made that the
strongest product innovations happen when the
customer becomes a co-creator of value, an
active subject in the process of product
development that results in true consumer-
initiated product innovation.
The paradigm of consumer-initiated innovation
when applied to the development and
acquisition of new product, naturally shifts the
retail mindset away from innovation being
"done to" the consumer, to more of a guided
partnership where the customer plays a vital
part in the product chain.
Paying attention to user experience and input to
the innovation of new solutions is critical. As
consumers vest themselves in the process, they
will continue to evangelize the retailer's use of a
consumer-initiated innovation process that
allows the flow of new ideas into a system
designed to develop them into products.
In a broad sense, the benefits of adopting
consumer-initiated innovations are well proven.
However, as Larry Sheldon [Harvard Business
Review 2007] points out, "companies are
pouring money into their insular R&D labs
instead of working to understand what the
customer wants and then using that
understanding to drive innovation".
While Sheldon's comment paints with a broad
brush, it accurately reflects the current, and
often constrictive, internal/supplier- driven
innovation practices often used by retailers.
Although R&D will always be an important part
of the retailer’s product strategy, more and
more companies are applying the concept of
consumer-initiated product innovation in
creating a channel to their customer by way of
adjunct innovation architectures.
Adjunct Innovation
In a recent survey of Consumer Packaged Goods
companies (CPG companies) conducted by the
independent marketing firm Affinnova,
[Affinnova 2013, recently acquired by Nielsen]
CPG employees expressed frustration with the
current innovation processes used by their
companies.
Among the biggest areas of frustration identified
by CPG professionals in Affinnova’s survey were:
• Inadequate tools: 75% felt their companies
were using outdated processes for innovation,
while 76% were also dissatisfied with the
collaborative practices within their organizations.
• Slow processes: 49% felt that their companies
were unable to move fast enough to keep up
with competitors and the pace of the
marketplace.
• Subjective decision making: 55% believed that
internal politics— not data—was guiding most
new product decision-making.
• Limited customer insight: 66% believed their
company wasn’t doing enough to understand
consumer needs.
The best way to address the frustration found in
Affinnova’s survey is to understand that as
technology allows awareness to build, the
relationship between the consumer and the
retailer organically deepens to a point of mutual
collaboration. This collaborative technique,
described in this paper as consumer-centric
product innovation, happens most effectively by
way of an adjunct innovation architecture built
within a balanced internal/external innovation
ecosystem.
With the continued expansion of connectivity
brought about by the integration of social

networking, retailers have better tools for
understanding the product needs of their
consumers, but will they? And will they apply
this understanding directly to the development
of new products using such architectures?
The foundation of all adjunct innovation
structures is to harvest new product from the
citizenry. To accomplish this, three objectives
must be satisfied:
1. Efficient interaction between the long-
established organizational functions, and those
bolt-on functions contained within the newly
formed external ecosystem.
2. Outreach to the consumers in a way that
builds trust and accommodates consumer-
provided solution spanning a wide range of both
free-flowing and targeted product categories.
3. The developmental accommodations for
solutions ranging from simple ideas to fully-
developed products.
The synthesis of these components requires a
rotation of involvement from suppliers,
consumers, and new product ideas around the
retailer as a central axis.
The actual Adjunct Innovation process
architecture that accomplishes the individual
tasks is constructed of a situational grouping of
scalable parts that accommodate the needs of a
given retailer.
Examples of these scalable apparatus are:
1. Intellectual Property (IP) - Most companies
have limited IP assets at their disposal requiring
the addition of independent counsel to review,
advise, and where appropriate, file necessary
documents.
2. Engagement- Effective two-way
communication is an important part of any
Adjunct Innovation program. The engagement
platform for adjunct innovation can be as
concrete as a brick-and-mortar research facility,
or as abstract as social networking. A dedicated
web-based interaction provides the most secure
place for the identification of category needs
and communication of requirements, while
collecting valuable information from the
consumer-innovators about product solutions.
3. Development - While an Adjunct Innovation
program can deliver significant value when open
only to previously-developed products, greater
strength and opportunity is gained from an
ability to harvest undeveloped product ideas.
Utilizing the resources and leverage of its
current supplier relationships, the retailer is able
to provide the continuity, guidance, and
demand needed to close the gap between a
product idea and a sellable product.
This well-crafted supplier/innovator relationship
creates a behavior model that both optimizes
the product for sale, and builds trust by
protecting the less business- savvy consumer-
innovator.
4. Education - By implementing a level of
education into the adjunct architecture, we
position the customer-innovator to return to the
process again and again. Each time with a more-

refined, better thought out, and educated
approach.
As conductivity and awareness increase, trust
builds quickly. As more and more consumers
aspire to be part of the retailers external
innovation ecosystem, the more refined the
process becomes, and the more volume and
variety it produces.
Adjunct Innovation In Use
Following Procter & Gamble's success with its
Connect & Develop innovation
strategy, many companies
started to change their own
innovation strategy to include some form of
external reach.
In Connect & Develop, Procter & Gamble sought
the help of their consumers to provide
technology solutions by encouraging them to
focus on innovative problem-solving within
certain categories.
Since its launch over 10 years ago, the program
has produced in excess of 2,000 consumer
technology projects resulting in a magnitude of
new retail product.
Just two years ago, in response to a dramatic
increase of need in new
products, television retailer QVC
created an adjunct innovation
program to harvest new product
innovation that could be fast-tracked to on-air
sales.
As most adjunct innovation architectures do,
QVC's program, entitled Sprouts, started off
accommodating only fully-developed product.
Over time the aperture of acceptance widened
as QVC leveraged its supplier relationships on
behalf of the consumer-innovator to solve
product development challenges.
The result was predictable - a dramatic increase
in not only innovative new product ideas, but a
pathway to convert consumer-driven ideation
into on-air sales.
Although we have seen an increase in the
construction of adjunct innovation programs at
the retail level, the
purest example of
consumer- centric
innovation in an
adjunct program is the online Apple app store.
With the advent of smart phones, Apple created
an online marketplace where consumers
experiencing problems could offer a solution to
be sold in the form of a product to Apple's
consumers.
As Apple continued to increase availability by
way of phone sales, they continued to expand
the circular product relationship between
themselves and their consumers - resulting in an
innovation ecosystem that harmonizes the
problem, the solution, and the sale.
In Conclusion
It’s intuitively obvious that the collaborative
problem-solving found in consumer-initiated
product innovation will accelerate the retailer’s
innovative process and improve the quality of its
outcome.
We further recognize that truly effective
innovation ecosystems also produce a wide
range of positive impacts affecting the entire
organization.

While styles of innovation will never disappear,
in the future more and more retailers will trade
them for hybrid adjunct systems that create
more consumer-initiated innovation.
The observation is that we are indeed
witnessing a strategic infection point as retailers
utilizing Adjunct Innovation architectures are
shifting their paradigms away from supplier lead
innovation towards collaborative, consumer-
initiated product innovation - achieving
significant competitive advantage in the process.
AUTHOR: Mark Reyland, President of MMD/Innovative Ventures - a professional retail product developer, author, and industry expert on
Innovation Programs. Mark@moremediadirect.com
REFERENCES:
Curly 2008, Open Innovation 2.0 A New Paradigm
Hansen, M. & Birkinshaw, J. 2OO7. The Innovation Value Chain. Harvard Business Review, June.
Schumpeter, J. A. 1942. Capitalism, Socialism, and Democracy. London: Routledge
Schrange, M. 2OO4. Michael Schrange on Innovation. Interview in Ubiquity, a peer-reviewed Web-based magazine, ACM
Publication, December. ubiquity.acm.org.
http://www.foodnavigator-usa.com/R-D/CPG-innovators-are-demotivated-and-frustrated-reveals-Affinova-survey

Innovation Reconsidered a White Paper (2015)

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Viewers also liked

Viewers also liked (6)

Similar to Innovation Reconsidered a White Paper (2015)

Similar to Innovation Reconsidered a White Paper (2015) (20)

Innovation Reconsidered a White Paper (2015)