15 most important Innovation Theories your company should be using

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:

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’.

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 projects

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.

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Nick Skillicorn

Chief Editor, Founder & CEO at Improvides Innovation Consulting

Creativity & Innovation expert: I help individuals and companies build their creativity and innovation capabilities, so you can develop the next breakthrough idea which customers love. Chief Editor of Ideatovalue.com and Founder / CEO of Improvides Innovation Consulting. Coach / Speaker / Author / TEDx Speaker / Voted as one of the most influential innovation bloggers.

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