16 Organizational Aspects

In the context of innovation, the process aspect refers to the complete innovation process—from idea generation, prototyping, a system for project selection, R and D cost control, speed to market, piloting, test methodology, ramp-up mechanism, and risk assessment to analyzing and handling market regulations and management of the complete product life cycle. Typically, the innovation process is linked and adopted depending on the innovation horizon and the company’s mix in the innovation portfolio. This aspect is linked strongly to profit and is both internally and externally focused.

Here, the term “organization” is used to describe the organization’s ability to deliver innovation projects. Capabilities that are especially important to this aspect are engaging and involving people, supporting goal-oriented leadership with a clear vision, and setting a high priority on innovation in all horizons. Idea diffusion within the organization and cross-functional capabilities, together with talent management and reward systems for innovations, are especially important. This aspect is internal and typically drives profit.

Learning is essential to innovation on several levels. Critical capabilities like being opportunistic, involving C-level management, running cross-disciplinary learning, evaluation, and a reward system are essential. Gaining insight from the horizon tree is especially crucial to succeeding in horizons one and two. Well-known large corporations operating in all three horizons and rewarded for their learning efforts include IBM, MindTree, and Verizon. In general, learning is an internal activity and is highly linked to profitability.

Supply development concerns scanning and involving suppliers and partners in order to extend the core business that you are really good at. Typically, today’s organizations go about this by defining new digital solutions, new business models, and new ways of producing and delivering offers to the market through digital trading places.  The supply-innovation aspect is internal and strongly linked to profit.

The channel aspect is one of the most important to finding new ways of building the capability to interact with the outside world. It is also one of the hardest to expand and develop, as it is not obvious during the emerging phase. Channel development is about how the offer is consumed, how it is distributed, and its delivery format. But to succeed, new channels cannot just add distribution; they also have to find new ways of consuming the products or services, maybe by adding machine learning or through new technical formats.

The linkages aspect is a broad concept that encompasses building and utilizing so-called “eco-systems” for developing, engaging, and rewarding external parties, benchmarking, reverse-engineering existing solutions, watching and learning about new technology in order to be faster, increasing capacity, and ultimately mitigating risks to keep the speed-to-market rate high. This kind of multifaceted eco-system is one of the most efficient ways of working in parallel in all three horizons, from incremental innovation to radical technology-driven innovations, even with scarce resources. Linkages increase the size of a company’s reachable market and are built upon internal strength in identifying, collaborating, and exchanging innovations with outside parties.

Openness is not about being uncommercial; it is about setting the stage for creating together, learning together, and eventually protecting IP together through patent exchange. The openness aspect typically contributes to growth of the market and is based on internal changes and development of capabilities for opening up and sharing.

The aspect “brand” addresses the activities of generating demand, sharing through telling, and setting the stage for creating so-called diffusion of new innovations. This aspect is also used well by the experience industries, such as resorts, movies, gaming, and the music business. It is used for generating and growing the market and is built upon primarily internal activities and capabilities.

Defining your organization’s value proposition is about uncovering what you are really good at—the DNA of the organization—and clearly expressing it, while at the same time attracting the right customers, clients, members, citizens, or other primary target groups. It also requires you to reinforce the offer in every single contact, from lead to sale to aftermarket. The value proposition is essential to driving and expanding the market, and finding the intersection between developing the offer (external context) and building the capability for marketing (internal context).

In the first horizon, organizations typically work with incremental innovations, and therefore it is necessary to keep costs and the development timeframe low. By deploying organizational components, blueprints, value offers, and all kinds of documents, including a process description and other useful bits and pieces, it is possible to work with continuous improvements and bring the innovation to market reasonably quickly, while keeping the cost down at the same time. This process is what we call “developing a platform.” Typically, it is organized through the use of product life-cycle management systems and other software.

The product-development aspect of an organization concerns whether and to what extent there is a systematic and working product-development process in place (specifically, the development phase of the innovation process) that contains development guidelines, evaluation of competitors’ features, and guidelines for planning the market launch. In contrast, the innovation aspect process is broader and contains all innovation-process capabilities, while the services innovation aspect refers to specific service characteristics. Unlike those two aspects, which are largely internally focused, developing products drives external transformation and market growth.

The service aspect encompasses systematic development and evaluation of existing and new services based on the organization’s systematic work to gain customer insights.  Developing innovative services can cause external transformation that drives market growth. Service design is a discipline that can dramatically improve the productivity and quality of services.

This is the organization's commitment to gaining customer insights studies and analyzing actual customer behavior as well as undertaking frequent independent market research and assessing market potential in order to segment the market in innovative ways. This is typically undertaken by analyzing data from sales, marketing, and customer care as well as running surveys, interviews, focus groups, and field studies. In this way, the organization generates a deep understanding of customer decision-making processes, which can be used to drive external innovation and the development of internal processes to support it.

An organization innovating based on customer experience uses an anthropological approach to studying human behavior in order to gain accurate new customer insights. This data-gathering process is typically not pursued though direct interaction but rather through watching and learning. This activity builds in automatic evaluations of how customers use and experience innovations, which it can then analyze to determine its next step. It also carries out regular A and B testing of new innovations, systematically comparing customer reactions to variants of the same innovation. Customer experience drives customer loyalty and yields fewer complaints, higher utilization, and ultimately sustainable profit.

Engaging customers and stakeholders is among the most efficient ways to create sustainable relationships and gain insights on a deeper level than ordinary market research. In this innovation aspect, building a community and involving them through activities such as cocreation, ideation, and rewards is key.  These activities can range from periodic customer surveys, and user groups to open innovation processess.

Capturing and protecting value is essential in the first and some of the second horizons, where commercialization and market penetration are essential. Intellectual property (IP) protection is one component of value capture, but at least as important is claiming a position and visualizing the advantages of being a customer. Proper pricing is important: the organization must develop a pricing system that supports each phase of the offer life cycle, often starting high and decreasing over time.