15 most important innovation theories your company should be using idea to value

28-07-17 08(0215 most important Innovation Theories your company should be using - Idea to Value
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15 most important Innovation
Theories your company should be
using
Nick Skillicorn
Every company says that innovation is important, and that they value the
ideas of their people.
In fact, creativity is becoming a core skill which companies know they need
in the future.
Yet the problem lies in the fact that so few established companies actually
know how to go about getting value out of their innovation ambitions, let
alone turning it into profit.
In fact, according to some estimates by Doblin, 96% of all new innovations
which established companies attempt fail to make a return on investment.
So what can you do about it?
In this article, I want to show you the 15 most important Innovation
Frameworks and Theories which your companies need to be aware of and
should be using.
Together, they reduce the risk of failure, improve the success rate of new
ideas and can help build an organisation which is more resilient to change
and able to grow.
Let’s get started:
15 – TRIZ
What it is: TRIZ is a problem-solving, analysis and forecasting tool

derived from the study of patterns of invention in the global patent
literature. The TRIZ acronym comes from it’s original Russian name, and
in English it is often referred to as a “theory of inventive problem solving”
or TIPS. At its core, the framework is a collection of strategies and tools for
finding inventive solutions to difficult problems.
By analysing thousands of patents which successfully solved problems,
researchers determined that there were approximately 40 inventive
principles which underlined the majority of these successes. TRIZ suggests
that by looking at whatever problem you are facing and comparing it to the
40 principles, you will find a number of ways to approach the finding of a
solution.
40 principles of TRIZ. Copyright By FotoSceptyk – Own work, CC BY-SA
4.0, https://commons.wikimedia.org/w/index.php?curid=45719323
When should it be used: If you really cannot come up with any

solutions to a challenge, it might be worth going through the list of TRIZ
principles. It is also useful for everyone in a company who might generate
ideas (which in my view should be everyone) to have a basic understanding
of what the principles are.
However, there are more effective ways to innovate, as you will see further
down this list.
Suggested reading:
14 – Building a Culture of Innovation
What it is: Rather than a specific theory or methodology, this is a
business impetus to make sure that the corporate culture actually
encourages innovative behaviour, instead of stifling it. The challenging part
of this is that culture is a very personal thing, which will vary between
companies, industries and regions. However, in every case, it is beneficial
for a company to look inwards and see whether their people, processes and
leadership are acting more as innovation enablers, or bottlenecks.
When should it be used: Every company should look at itself frequently
to find out how it can build its innovation culture in a way that is right for
them. This does not mean copying what “innovative companies” like
Netflix are doing (much of their famous HR Culture document would
simply not work in many other companies), but instead seeing what impact
their own processes are having, and how they can enable and encourage
more innovative behaviours, from people at all levels of the company.

Suggested reading:
13 – Budgets for Micro-Innovations
What it is: Everyone always says that innovation is risky because you are
investing money in things that are likely to fail. One thing you can do to fix
this is to try more smaller-scale innovation experiments, which means you
can run significantly more experiments, a lot faster, but at a fraction of the
cost. The secret is to make it as simple as possible for people to try these
experiments for themselves.
When should it be used: Any organisation that wants to enable their
staff who have an idea to “try it out” or do an initial market experiment. An
excellent example, outlined in the video below, is Adobe’s Kickbox
program, which gives anyone who has an idea and wants to try it out a box
with advice on how to approach the experiment and a pre-paid credit card
with $1,000 to be used however the person wants.
Suggested viewing:

Adobe Kickbox Innovation
12 – Disruptive Innovation
What it is: One of the most important theories of innovation, but one
which is usually completely misunderstood. Brought to prominence by
Professor Clayton Christensen’s book The Innovator’s Dilemma, this
important theory provides an explanation as to why large, established
companies eventually get overtaken by smaller ones, and it introduced the
concept of disruptive innovation.
Put simply, it theorises that small companies can disrupt the market of
large companies by releasing a new version of an offering which appeals
more to a subset of the customers. In many cases (especially those listed in
the book, such as Computer Storage, Department Stores and Construction
Equipment), the small company releases a new technology which is
inferior in quality or performance to that of the large company, but makes
up for it in another way, like a lower price or convenience. Over time and

iteration, this new technology will begin improving to handle more
demanding uses.
The important aspect of the theory which most discussions ignore though
is that while it is happening, management at the established companies
think they’re making the right decision to let the new companies take over
the low-end of the market. The reason: The low end of the market is often
the least profitable, and by removing it from your customer base, the large
companies are actually becoming more profitable (although not necessarily
making more profit). Since company leaders have often been taught that
increasing profitability is the holy grail of management, it makes perfect
sense to allow someone else to take over the low market.
When it should be used: Very seldom! This might seem like a strange
thing to say, but the most important thing to realise about Disruptive
Innovation is that most people completely misinterpret it. Most startups
state that their aim is to be disruptive or to disrupt a specific industry. The
problem is that disruptive innovation is a force, not a tool. It has no
predictive power. The theory mainly explains how large corporations were
disrupted, not how a small company can guarantee success when faced
with a larger competitor. Therefore, it is important to understand the basis
of the theory from a defensive standpoint, to help prevent them from being
disrupted.
Suggested reading:

11 – Ambidextrous Organisations / Dual Innovation
What it is: One of the most challenging aspects of innovation for most
companies is not the generating of ideas, or the development of new
innovations. Instead, it is integrating new innovations into the business
without affecting the performance of core business operations negatively.
This is something a large number of companies struggle with. Even if they
have agreed on the importance of innovation and have set up teams or
departments to develop new value-adding, innovative products and
services, these products may end up never being launched because nobody
in the existing business units will take responsibility and take the risk of
launching them. They can cite a number of seemingly valid reasons for
this, including:
My team hasn’t got the time to resources or time to take ownership of
this new thing
My team doesn’t have the skills to understand or support it if
something goes wrong
I don’t want to risk showing this to our customers and them not
liking it
It might take sales away from our current offerings
I’m not putting my neck and job on the line to promote something
which I wasn’t involved with developing

If this doesn’t work, it is going to make me look bad
I go through a whole list of the psychology of why managers don’t like
being asked for permission to innovate in another article here.
Ambidextrous Organisations on the other hand are companies which have
set themselves up to do three things:
1. Effectively run their core business
2. Develop, test and validate innovations outside of their core business
3. Integrate a number of the best innovations back into the core business
in a reliable manner
The process of making this happen is often referred to as “Dual
Innovation”, and builds the skills, capabilities and processes within a
company to make the transition of innovations into the core business more
likely to take hold.
When should it be used: Any company which has or is thinking of
building an Innovation Team / Department / Lab / Skunkworks should be
aware of this concept of Dual Innovation and make sure your teams have
the skills and permission to engage in it.
Suggested reading: There are not that many resources out there about
this theory yet as it is quite new. However, I would recommend the blog by
one of the people leading the development of it, Dr Ralph-Christian Ohr,
who I have interviewed on the topic previously (premium content).
https://dual-innovation.net/blog/
10 – Open Innovation, Crowdsourcing and Idea Management
What it is: Going by many names, this is the process by which a company
can set a challenge that they want ideas for, and gather ideas from
hundreds, thousands or hundreds of thousands of people, both within their

organisation and externally. Historically, companies may have used
systems like suggestion boxes or an email address where people could send
their ideas, but more often than not, the ideas sent in didn’t go anywhere,
leading to frustration in both the leadership (who could not organise and
evaluate ideas) and the people who submitted them.
However, recently there have been a number of startups providing a
software solution to enable companies to set up innovation challenges,
have thousands of people submit their ideas, and then evaluate and
manage these ideas in a more structured way. Whether you call it Open
Innovation, Idea Management, Innovation Management Systems or
Crowdsourcing, the concept is pretty similar.

An example of the dashboard of Idea Management Systems: Wazoku’s Idea
Spotlight

When should it be used: There are various types of companies which
will benefit the most from Idea Management. Here are a few:
1. Companies which have stubborn challenges for which an outsider’s
perspective could provide a breakthrough (e.g. ones where traditional
experts in a field have not been able to solve a challenge with existing
methods)
2. Companies which want to solicit feedback and ideas from a large
number of internal employees (e.g. bringing to light inefficiencies
which leadership would not be aware of)
3. Companies which want to get feedback on early prototypes or ideas
from the marketplace (e.g. to beta test multiple variations of an
offering to see if / which one proves to be popular)
4. Companies which want a structured system to manage a funnel of
ideas and projects (e.g. when thousands of potential ideas need to be
evaluated and budgets/resources need to be assigned)
5. Companies which want to allow external parties/consumers to suggest
improvements to existing products or entirely new products (e.g. like
P&G’s Connect and Develop platform)
Importantly, it should be noted that there are times when this system could
be overkill, such as for start-ups which are working on a single product and
are very early in their journey. Typically, more established companies will
gain more benefits from a system like this. Additionally, software systems
like this do not replace people in the innovation process and cannot
automate its management.
Suggested reading: I would recommend you look at the website and
blog of Wazoku, an Idea Management system company I have worked with
and which produces a lot of thought leadership on the subject.
9 – Understanding the science of creativity
What it is: For a long time, there was a lot of crap advice out there about

improving creativity. Often, it would use vague phrases like “rediscover
your inner child”, “think like an artist” or “ask yourself what Apple would
do”. And this advice almost never helped, because it didn’t give people the
understanding of what they should actually be changing. In the last few
decades, there has been an explosion of excellent, scientific research into
creativity and what affects it. For example, we now know that nurture is
more important than nature, that creativity levels are falling over time,
how the brain is wired to spot patterns and ignore new input and how it
would rather work off memory than being creative. When you truly
understand the reasons for how creativity works, based on experimental
evidence rather than just intuition, you can then also put in place ways to
improve it (Ed: if that is what you are after, and I would suggest
everyone should be). We even now know why people don’t realise they are
rejecting creative ideas when they are put into decision-making positions
(premium content).
When should it be used: I would strongly recommend that everyone
who sees the value in new ideas should be educating themselves on
understanding creativity better, especially from an evidence-based,
scientific basis. This is what I have been working for years to develop and
share, and was one of the major sets of highlights in the recent Innovation
and Creativity Summit. I would also remind everyone that all people who
register for a free account with Idea to Value get access to a free mini-
course on introducing the science of improving your creativity (click here
to get yours now).
Suggested reading: I would strongly suggest you read the articles I
linked to above and make sure you sign up for the Idea to Value newsletter
(and get our creativity training tracker) as we write often on this blog about
the science of creativity. But I would also recommend the following books:

8 – Effective Brainstorming
What is it: Every company knows about brainstorming. And yet almost
every company is incredibly frustrated by how ineffective it is in actually
generating solutions. This is simply because most companies don’t realise
that they are doing it completely wrong. And this isn’t necessarily their
fault, as most professional brainstorming facilitators are using rules which

were first introduced in the 1950s and have long since been proven to be
ineffective. In fact, a lot of creativity research outlined in the previous
framework (understanding your creativity) has led to breakthroughs in
understanding how teams generate ideas together and has allowed much
more effective brainstorming techniques to be devised. One such
technique, which may seem counterintuitive at first but really works, is to
have people write down their initial ideas in silence before any group
discussion begins (this is called brainwriting, and is especially good at
getting creative suggestions out of more introverted people).
When should it be used: Any time a company wants to develop a set of
ideas or potential solutions to a challenge as a group. This should always be
done instead of traditional brainstorming.
Suggested reading:
This article on Effective Brainstorming, and this book by Bryan Mattimore,
which elaborates our interview from the Innovation and Creativity Summit
on various brainstorming techniques (premium content):
7 – Lean Innovation Management
What it is: Inspired by a number of Lean Startup principles along with
aspects of Design Thinking and Agile Development, Lean Innovation
Management is a framework to manage innovation projects in a more agile
way than traditional project management. For example, instead of asking
managers to develop a full business case with lifetime costs and risks to ask

for budget for a full project (which is often highly inaccurate and purely
guesswork for innovation projects), a manager might only be required to
ask for budget to do an initial set of experiments to test the market for an
idea. This can lead to a much larger number of innovations being tested
much more quickly, for a lower cost and at a lower risk than traditional
management methods.
Some of the aspects of Lean Innovation Management include:
1. Encouragement of lots of small scale, cheap experiments instead of
full launches
2. Allocating small initial budgets to get to the next stage in a lifecycle
early on (e.g. to test the market), instead of asking for a full project
budget with a business case
3. Incorporating feedback from multiple parties throughout the design
and development process
4. Building of “Minimum Viable Products (MVPs)” and prototypes and
testing these with real people
5. Iterating and changing direction (“pivoting”) if the feedback suggests
you are going in the wrong direction
When should it be used: Any company which has a limited budget of
money and pool of resources to work on innovation projects could greatly
benefit from a Lean Innovation approach. For example, look at this high-
level innovation project lifecycle which I use with my clients, and which
encapsulates a number of Lean Innovation Management principles:

Improvides Innovation Lifecycle
Suggested reading:
6 – Business Model Canvas
What it is: Business Model Canvas is a great tool to describe, design,

challenge, and pivot your business model and test out new business
models, vital when developing innovations. Developed by Strategyzer co-
founder Alex Osterwalder, it enables you to succinctly lay out the various
aspects of a new offering and determine how the components will fit
together to form a business model. This allows you to see potential hurdles
which need to be overcome, gaps in the offering or even potential gaps in
the market. Often this can provide a much clearer overview of an offering
than other summaries, like traditional business cases.
Business Model Canvas
When should it be used: At the initial stages of any project when you
need to look at the overall picture and how a business model might fit
together. Especially useful when trying to determine exactly what the value
proposition for a customer will be.
Suggested reading:

5 – Design Thinking
What it is: One of the most popular but misused terms going through the
business community today is Design Thinking. Design Thinking is a
methodology used by designers to solve complex problems and find
desirable solutions for clients. A design mindset is not problem-focused,
it’s solution focused and action oriented towards creating a preferred
future. Usually, it involves a company spending time with users to find out
what their current everyday experiences are, and use those to find insights
into what the real underlying challenges are and how they might be
addressed.
Contrary to what some people say, it is not just about the “design stages” of
product development (initial sketches, graphic design, prototyping etc).
Instead, imagine it more as a collection of processes which lead to a better
understanding of the needs of a user and ways to find solutions to those
needs.
Christoph Meinel and Larry Leifer, of the HPI-Stanford Design Thinking
Program, laid out four principles for the successful implementation of
design thinking:
The human rule, which states that all design activity is ultimately
social in nature, and any social innovation will bring us back to the
‘human-centric point of view’.
The ambiguity rule, in which design thinkers must preserve ambiguity
by experimenting at the limits of their knowledge and ability, enabling
the freedom to see things differently.

The re-design rule, where all design is re-design; this comes as a
result of changing technology and social circumstances but previously
solved, unchanged human needs.
The tangibility rule; the concept that making ideas tangible always
facilitates communication and allows designers to treat prototypes as
‘communication media’.
#16: IDEO's Tom Kelley is Design Thinking's ultimate disciple, he makes th…
When it should be used: The methodology is especially useful in
finding solutions to so-called wicked problems, where the challenge itself
is ill-defined or tricky, as opposed to challenges where you can often find a
solution based on experience or technical knowledge. This is what makes it
such a useful aspect of any innovation framework, where you ultimately are
trying to find a solution which adds value to the end customer, but you first
need to find out what is causing the challenge for the customer.
Suggested reading:

4 – Portfolio Management
What it is: Portfolio management is the selection, prioritisation and
control of an organisation’s projects and programmes in line with its
strategic objectives and capacity to deliver. The goal is to balance
innovation programmes, change initiatives and business-as-usual while
optimising resource usage, risk and return on investment. In my view, this
is one of the most fundamentally overlooked frameworks for improving the
success rate of innovation projects and every company should put more
emphasis on it. Traditionally, portfolio management (if it happened at all)
would be handled by the central team covering the programme
management of various projects in a company, often called a Programme
Management Office (PMO), and it would help evaluate which projects
should be invested in, plan them, track progress and handle risks and
issues.
If Programme Management is about doing projects right, then
Portfolio Management helps to do the right projects1
Incorporating innovation projects into a programme portfolio can be
tricky, but can also reap huge benefits when done correctly:
1. It helps evaluate which innovation projects fit the company’s overall
strategic goals
2. It is vital for incorporating innovation projects back into the core
business (see point 11 about Ambidextrous Organisations)
3. It helps determine potential bottlenecks and dependencies between

innovation projects that individual team members may not realise (for
example, the availability of specific people who might otherwise be
pulled in various directions)
4. It can help see how projects fit together across various sites, territories
and countries
5. It can spot and reduce duplication of effort and reduce overall costs
6. It can help sequence activity and resources between projects and
teams
7. It can distinguish differences between types of projects and determine
the best management methodology / principles for each instead of a
“once size fits all” approach (for example, there are big differences
between the ability to create a full business case for an 18-month IT
transformation, compared to a short-term initial MVP build for a new
offering)
8. It can be used to “balance” the portfolio budget and resources between
projects which build out the core business, build related new
innovations and also more radical innovations (see point 3 about
Three Horizons)
9. It can be used to spot gaps in the overall list of projects and types of
innovations you are developing (see point 2 on Ten Types of
Innovation)
10. It can significantly reduce the perceived risk associated with doing
innovation projects
11. It can give leadership a clearer idea of the direction the company is
travelling, what customers are demanding and innovations they are
developing to address that demand
When should it be used: Every company which is running multiple
projects simultaneously, as well as those developing new innovations,
should have a portfolio view of everything that is going on in the company.
3 – Three Horizons

What it is: The Three Horizons Innovation Framework is based on
McKinsey’s Three Horizons of Growth, but used to determine how well
your business offerings will be able to deliver value and fit into your overall
strategy as time goes on. The horizons in an innovation context are as
follows:
Horizon 1: exploiting your current offerings (core business activity
and incremental innovations to improve current offerings)
Horizon 2: extending the business with new offerings which build on
the core but provide new value
Horizon 3: exploring new future offerings that could change the
company but aren’t ready yet
As time goes on, companies will notice that customer tastes, technology,
competition and the whole market will change, often making their current
offerings less valuable (and therefore less strategic) and will eventually
require more innovative offerings to take their place. When these moments
happen, they are disruption points where one horizon is replaced by
another, as outlined in this image:
Three Horizons of innovation summary
When should it be used: The Three Horizon Framework is usually
applicable at CXO / Executive level discussions within companies to ensure

that leadership have an overall view of the need for various types of
innovation activity. Therefore it enables company leadership to become
aware of the need to prepare for future change, and to invest in a variety of
innovations that may not currently be viable but which could become the
most important offerings for the company in the future. This is important
for looking into the future market scenarios to adjust your strategy, and to
balance your innovation portfolio accordingly.
Suggested reading: Paul Hobcraft has numerous good articles on the
Three Horizons innovation framework, and we had an interesting
interview about it which you can listen to below.
2 – Ten Types of Innovation
What it is: The Ten Types of Innovation is a framework for evaluating
what various types of innovations your company is currently trying out.
Based on research of more than 2000 innovation projects by innovation
consultancy Doblin, what they found was that overall there are ten distinct
ways that a company can innovate, which are:
1. Profit Model: How you make money
2. Network: How you connect with others to create value
3. Structure: How to organise and align your talent and assets
4. Process: How you use signature or superior methods to do your work
5. Product Performance: How you develop distinguishing features
and functionality
6. Product System: How you create complementary products and
services
7. Service: How you support and amplify the value of your offerings
8. Channel: How you deliver your offerings to customers and users
9. Brand: How you represent your offerings and business
10. Customer Experience: How you foster compelling interactions
What is fascinating is that the research also clearly showed the impact of

companies trying more than one type of innovation. While most companies
innovate by improving the performance of their product (type 5), those
companies which tried to add value by innovating in several ways were
consistently more successful, with their innovations more likely to make a
return on investment.
To see the full impact of trying out more than one type of innovation, check
out this graph from Doblin which analyses the number of different types of
innovations the companies were attempting and how they performed
against the stock market:
As you can clearly see, the companies which attempted more types of
innovation consistently outperformed the market.
When should it be used: In conjunction with portfolio management,
design thinking and a number of other frameworks on this list, the Ten
Types of Innovation framework gives an excellent basis for evaluating
whether or not there are additional ways that your company could try to

add value or different ways to approach a challenge. For example, you can
set yourself the challenge of trying to innovate without changing the
product performance at all and using just the 9 other types of innovation.
Additionally, it is extremely powerful to evaluate your current portfolio of
innovation projects against the matrix of the Ten Types of Innovation,
since then you will be able to see potential gaps in your own list of projects,
as well as potential gaps in the market which nobody is currently exploiting
or exploring.
Suggested reading:
1 – Jobs to be Done
What it is: In my view, the most important new innovation framework
you need to be aware of is this one. “Jobs to be Done” centres around the
concept that instead of thinking about what features or benefits a customer
would want to buy, an innovation should instead try to find out what
job/activity/outcome a customer is trying to accomplish, and then develop
something which helps them achieve that.
As Theodore Levitt said, “people do not want a quarter-inch drill, they
want a quarter inch hole.”
This way, you can develop an offering that a customer can “hire” to
complete their job. Office workers hire word-processing software to create
documents. Surgeons hire scalpels to dissect soft tissue. But few companies
keep this in mind while searching for ideas for breakthrough offerings, and
simply asking people what jobs they have is unlikely to result in any
insightful answers, as people themselves often don’t realise or can’t

verbalise what is frustrating them or what they are trying to accomplish.
What companies really need are insights, not opinions.
The Jobs to be Done framework helps companies get the true insights from
real people about the challenges and frustrations they are facing. By
segmenting these people, it may be possible to find an innovative solution
to meet a number of the challenges which together mean a product could
do the entire “job”, and therefore make it much more appealing to a
customer.
In this podcast interview, I speak with the original creator of the
Framework Tony Ulwick about what it is, and how you can use it.
I would also highly recommend you check out two of the authors of the
newest book on the subject, who I interviewed as part of the Innovation
and Creativity Summit, Taddy Hall and Karen Dillon (premium content).
When should it be used: Any innovation project which your company is
starting should aim to investigate the potential jobs to be done for a
customer. It is most effective at the early stages of a project when a team
should be going out and investigating how things currently run. This
involves going out and meeting real people, observing them in a neutral
and unbiased way and trying to get insights by learning about their
behaviour and frustrations, rather than their opinions.
Suggested reading:

Summary
Now that you have a better understanding of some of the most important
innovation frameworks and theories, you are better placed to have your
innovation projects succeed. But as always, the most important thing is to
actually go out there and try these out (when appropriate). If you just go
back to business as usual, your innovation projects are just as likely to fail
as before. But if you use these frameworks effectively, it could just lead to
your biggest breakthrough yet.
Which one of the frameworks resonated with you, surprised you or
impressed you the most? Let me know in the comments below, and please
share this article with anyone you know also cares about innovation.
Chief Editor of Ideatovalue.com and Founder / CEO of Improvides
Innovation Consulting. Coach / Speaker / Author / TEDx Speaker / Voted
as the world's #5 Innovation blogger in 2016, I help individuals and
companies build their creativity and innovation capabilities, so you can
develop the next breakthrough idea which customers love.

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15 most important innovation theories your company should be using idea to value