By James Janega
A common question that arises in client conversations – and that should be considered by all corporate executives charged with competitive strategy – is which innovation strategy would best fulfill the company’s growth ambitions.
There’s a lot of competing advice in the marketplace and, unfortunately, much of the best theoretical research is around ideation at the front end of innovation. That leaves innovation at scale surprisingly unexplored.
Critical questions remain for executives who must balance the development of new technologies and business models (under high uncertainty), with the need to optimize existing business practices (under high scrutiny).
Common questions include: Which options should be considered now? In which combinations? And what would it take to implement them given current constraints and our company’s people?
With my teammates at Slalom, I frame those questions using a model we call “WINDOW.” Using it helps us think about recommendations for a blend of corporate venture investment, open innovation, partnerships, and business optimization that our clients could consider for their innovation portfolio and end-to-end innovation strategy. It also lets us target our research into what their industry peers are and aren’t doing, as well as spot trends in the marketplace that offer unique competitive insights.
(The acronym stands for “Which INnovation do I Want?” and the overlapping 2×2 grids look vaguely like an old-fashioned window pane.)
The approach is based on decades of research I’ve analyzed from Clay Christensen, Michael Raynor, Rebecca Henderson, Kim Clark, Marc Knez and many others, and which I’ve then stress-tested against current market trends and with our clients.
Like all our innovation work at Slalom, it may be born in research, but it must be grounded in reality to take to market!
One of its chief advantages is it lets users approach the problem from an industry-agnostic viewpoint.
In its most basic form, two simple questions frame the strategic approach:
- The market: Do advances in the marketplace create advantages that support or could automate my existing processes? Or do they create changes that could disrupt to my existing processes?
- Consumer behavior: Do competitive advantages stem from customer preferences already known? Or are customer preferences still evolving?
The model offers three buckets for a typical strategic innovation portfolio:
- Long-shots: Innovations that likely will be disruptive but which are still emerging and forming. Tactics that have been effective in this area include corporate venture investments, open innovation, joint investments in incubators, and cautious wait-and-see strategies. Internal capabilities to experiment lightly, develop proofs-of-concept, and engage with outside innovators are the key to working in this environment.
- Find a partner: Innovations with known solutions and known interests that we don’t currently possess. Joint ventures, partnerships, M&A and “hired” innovation from outsourced providers are appropriate to consider here. Critical internal capabilities include the ability to spot market shifts and articulate customer preferences; develop competencies for developing and maintaining strategic partnerships; do the diligence for acquisition and post-merger integration; and/or oversee appropriate vendor selection.
- Do it now: Benefits are known, advances play to the company’s needs, and the capabilities to implement the solutions are readily at hand. In these cases, companies should certainly consider investing in the solution because it would help optimize existing systems. The most important factors bearing on a decision in these cases are about cost-benefit analysis and the relative apples-to-apples prioritization of innovative solutions.
For examples of the types of innovations that spring from those investment models, I might put driverless cars in the top-right “long-shots” box. I’d put into the “find a partner” box a move like shipper UPS’s strategic enterprise fund investment in trucking startups such as trucking safety and fuel-efficiency firm Peloton Technology. Implementing Salesforce would fit in the “do it now” box.
How did the market behave over the past 12-24 months? Despite the deserved excitements around startups that are pushing the boundaries, VC investment accounted for only 8% of the $121 Billion in innovation investment I estimated for 2016. Sixty-two percent of it was spent on management consulting and joint ventures in “find a partner.” Another 30% went to growth equity investments in B2B software. That’s a back-of-the envelope assessment, but it’s directionally accurate.
Incidentally, it long bothered me that our WINDOW model offered three clear strategies and a blank space on the 2×2 matrix. I couldn’t understand which beneficial strategy might exist in an environment where existing technologies would help automate internal processes, but no one knew what customers would like.
My discerning colleague George Quall had a burst of insight around this: “Isn’t this where hedge funds play?” It was a worthwhile call-out. It could be where hedge funds play, we decided. Inasmuch as they would want to bet that existing companies would spend money on a solution that customers might reject – in other words, against an incumbent.
If that sounds like nonsense, it isn’t.
Many technology consultants have unfortunate stories about helping clients implement solutions that won’t move customers or the bottom line. As Yogi Berra purports to have told his wife on the way to the Baseball Hall of Fame: “We’re lost, but we’re making good time!”
It’s a funny quote, but there’s no reason to stay in George’s – or Yogi’s – blank box. Just open the WINDOW and innovate for real.
James Janega leads the Innovation & Insights group at Slalom Chicago. He is an Entrepreneur-in-Residence at the University of Illinois’ EnterpriseWorks accelerator, a member of the Chicago Ideas Co-Op, and helps enterprise companies and startups improve the way they think about innovation strategy, customer validation, building more robust innovation capabilities and processes. You can reach him at @JamesJanega on Twitter.