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The 6P Model for Making Innovation a Core Capability

If innovation is so important for business growth, why do so many companies get it wrong? The 6P Model for Making Innovation a Core Capability provides an overview of they elements any organization should have in place to support always-on, sustained innovation that delivers positive business outcomes.

The original blog post for this content can be found at http://gregverdino.com/innovation-capability.

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The 6P Model for Making Innovation a Core Capability

  2. 2. StartInnovation is the Key to Business SuccessPETER DRUCKER“The business enterprise “Innovation is the “An established companyhas two - and only two – specific instrument of which, in an agebasic functions: marketing entrepreneurship. The act demanding innovation,and innovation. Marketing that endows resources is not able to innovate,and innovation produce with a new capacity to is doomed to declineresults; all the rest are costs.” create wealth.” and extinction.”HOW WELL DOES YOUR BUSINESS INNOVATE?© VERDIINO LLC. All Rights Reserved. | 1
  3. 3. Innovation UpsideIt Drives Superior Business Results GROSS PROFIT ENTERPRISE VALUEInnovation isn’t all about starry Indexed mean of normalized Indexed mean of normalized 5-year CAGReyes and unfettered creativity. 5-year CAGR Average Average Across All 56It is a business discipline that Across All Companiesprovides a clear pathway to Companies 48 51 49stronger performance in key 45business metrics. 44 42 43Companies that both exhibit strongalignment between innovation andbusiness strategy, and possess asupportive innovation culturefinancially outperform their lessinnovative peers. Low Moderate High Low Moderate High LEVEL OF STRATEGIC+CULTURAL ALIGNMENT SOURCE: Booz & Company, 2011 “Global Innovation 1000”© VERDIINO LLC. All Rights Reserved. | 2
  4. 4. Innovation RoadblocksWhy Do So Many Businesses Get It Wrong? WHY DO INNOVATIONS FAIL?Most senior executives rank 63% DON’T MEET CUSTOMER NEEDSinnovation among their top Due to:business priorities. Inability to develop strong, market-relevant ideasBut many have not taken the Insufficient connection to customerssteps necessary to make Fear of failureinnovation a core capabilitythrough sustainable programs 54% ARE TOO LATE TO MARKETand repeatable processes. Due to:It’s no surprise that 80% are Too many in-flight innovation projects (lack of focus)not satisfied with how their Too much innovation risk (unbalanced portfolio)organizations innovate and Too much waste (inefficient, low impact process)disappointed with the return ontheir innovation investments. Underdeveloped innovation capabilitySOURCE: Accenture Innovation Survey, 2009: Top 2 reasons cited for innovation failure© VERDIINO LLC. All Rights Reserved. | 3
  5. 5. Mindset ResetRethink the Way You Think About InnovationIT ISN’T OPTIONAL IT’S NOT (JUST) IDEAS IT’S NOT AN EVENT“Innovation is the central job Innovation must focus on Real results require anof every leader – business unit solving clearly defined always-on approach,managers, functional leaders, challenges with applied sustainable processes andand the CEO.” A.G. Lafley, creativity, a clear path to platforms that empower yourretired Chairman & CEO, P&G implementation, and an eye people to function as a well- on accountability. tuned innovation capability.IT’S NOT (ALL) iPHONES IT’S NOT (JUST) R&D IT’S NOT OUT OF REACHSuccess requires leaders to Differentiate your business You don’t need to be a bornmanage a diverse portfolio of across all core areas - from visionary, and you don’t needradical, substantial and strategy, sales and customer a massive budget to win atincremental innovations that service, to people, product innovation. You do need thebalance risks with rewards. and process (and everything right attitudes, behaviors, in between.) strategy, and systems.© VERDIINO LLC. All Rights Reserved. | 4
  6. 6. The 6P ModelMake Innovation a Core Capability© VERDIINO LLC. All Rights Reserved. | 5
  7. 7. PurposeAlign Innovation With Your Strategy And while a quick, creative approach to some new new thing can sometimes pay-off, the “once is witty, twice is shitty” principle comes on fast, and you’re rarely left with a properly grounded, repeatable process for making magic time and time again.PURPOSE Purpose means starting with why  — why must weInnovation must be purpose-driven. innovate in the first place. It means considering whatIn other words, it must be fully — what do we hope to achieve through innovation. Italigned with your organization’s then uses your overarching corporate strategy as a no-overarching business strategy. This nonsense filter to turn innovation into a how — howsounds obvious, but I’ve worked will innovation in this area empower us to morewith enough big brands and inside effectively deliver upon our top priorities; whether thoseenough agencies to know that — priorities are revenue generation, top notch servicemore often then not — this clear delivery, cost savings, vertical or horizontal expansion, or just about anything else that differentiates yoursense of strategic purpose is the company from its competitors.exception more often than it is therule. We have a name for innovationfor innovation’s sake — we call that ARE YOU GROUNDING YOUR CALL FORthe shiny object syndrome. INNOVATION WITH A CLEAR SENSE OF PURPOSE?© VERDIINO LLC. All Rights Reserved. |6
  8. 8. PeopleBuild an Innovation Program of Substance and the authority to make it happen, or might be disengaged or disenfranchised. All of that said, these people may be very good at what they do and incredibly valuable to the company. But they’re not the right people to drive an innovation effort.PURPOSE This doesn’t mean you need to restock your companyYou’ve already got people, right? But with Steve Jobsian innovation super-humans. So whohave you got the right people? If do you need? People with the right mindset, foryou’re like many companies I’ve starters — individuals committed to the challenge ofworked with over the years, you change; who are well aware of the world outside yourprobably have senior leaders on the walls; who can view your business challenges throughwrong side of the digital divide, too a series of new lenses, apply solutions from beyondvested in the status quo, too resistant your team, department, company, industry or even theto change (or scared of the business world itself. repercussion), or too beholden to this And then you need to guide them, support them, andquarter’s P&L. You probably have give them permission to fail. staffers too tapped with their currentworkload, who mean well but lack thecharter to drive change from within DO YOUR PEOPLE BRING UNCOMMON, OUTSIDE PERSPECTIVES & APPROACHES TO WORK DAILY?© VERDIINO LLC. All Rights Reserved. |7
  9. 9. ProcessBuild an Innovation Program of Substance ideas die on the vine? We all have. A true, sustained innovation capability is governed by clearly defined processes that govern how ideas get surfaced, how they get evaluated, what criteria theyPROCESS must meet to advance to the next stage, and what happens when the company commits to testing theOK, so now you’ve got your free idea in the market. spirits and free thinkers — set themloose, right? Well, not exactly. Process may not be sexy, but it’s necessary if youSustainable innovation, done right, want your innovation efforts to succeed. means you’ll capture new ideas fromall corners of your company. All. The.Time. You know how you’ve gone into allthose standalone brainstorms, spentan inspiring hour batting about coolnew concepts, then went back toyour workaday world as your new HAVE YOU DEFINED & COMMUNICATED CLEAR PROCESSES TO GUIDE YOUR INNOVATION PLAN?© VERDIINO LLC. All Rights Reserved. | 8
  10. 10. PlatformsBuild an Innovation Program of SubstancePLATFORMSSystems and software go hand-in-hand with old fashioned process,making it easier - and at scale,possible - to move ideas to executionefficiently, cost effectively, and withthe right number of checks andbalances. My purpose here isn’t topromote specific platforms; there arelots to choose from. They make yourlife as an innovator easier and theoutput of your process more viable.Without them, even the bestinnovation intentions will give way to DO YOU HAVE INNOVATION PLATFORMS IN PLACEchaos over time. IN YOUR ORGANIZATION TODAY?© VERDIINO LLC. All Rights Reserved. | 9
  11. 11. PartnersBuild an Innovation Program of Substance consider ways to bring nimble upstarts into the fold in order to up the fresh ideas quotient, while leading edge start-ups might consider how well resourced multinationals could fund edgy new ideas. Public sector and private sector can work together. PARTNERS The possibilities for partnership are limited only byYou didn’t think you could do it all your willingness to collaborate with others.yourself now, did you? If you trulyintend to innovate (to create newvalue for customers in order to realizenew value for the company) you mightwant to think of your customersthemselves as your partners ininnovation. You may know this ascrowdsourcing… But as much as thelines are blurring between companyand customer, the lines are also DO YOU INVOLVE YOUR CUSTOMERS,blurring between company and COMPETITORS, COLLABORATORS & OTHERcompany (even company and COMPANIES IN YOUR INNOVATION APPROACHcompetitor). Large corporations might TODAY?© VERDIINO LLC. All Rights Reserved. | 10
  12. 12. PerformanceDefine, Measure & Reward Innovation Success core capability (much less a cornerstone of a company’s culture) when the only measures of performance relate to near term profits, successful completion of day-to-day tasks, and other measures of the here-and-now. Of course those things arePERFORMANCE important - there’s no sense in prepping your business for tomorrow while you run the risk of goingWay back at the First P, I wrote that out of business today. everything starts with purpose. But,truth be told, performance is as good But a truly innovative organization knows that thea place to begin and one of the most right incentives, rewards, and recognition systems arecritical components for innovation necessary conditions for innovation excellence. Thinksuccess. Let’s be frank — it feels intrinsic rewards (status, recognition) as well asgood to talk about innovation, but it’s extrinsic rewards (prizes, money). Think beyond thea different matter to rework the way check box on the performance appraisal…we incentivize our people to make itworth their while to bring new ideas,process improvements and more tothe table on a routine basis. Simply HOW DO YOU MEASURE THE IMPACT OFput, innovation will never become a INNOVATION AND REWARD THE PEOPLE WHO MAKE IT HAPPEN?© VERDIINO LLC. All Rights Reserved. | 11