The image here is the list of exactly which capabilities your company needs to succeed at innovation. Read on to understand how it works and how to implement it yourself.
Almost every business leader will tell you that they value innovation and that it is a positive & important factor for their company.
In fact, innovation and creativity are cited as being some of the most important skills and differentiators listed by CEOs which will determine their future success. And companies regularly boast about how they are spending millions (and sometimes billions) of dollars into research & development to come up with innovative new offerings.
However, why is it then that approximately 96% of innovation efforts fail?
The answer is actually surprisingly simple.
Most companies don’t understand that innovation isn’t just a single process that can be improved, but the result of capabilities existing within the company which enables ideas to be developed and scaled into solutions.
Now, I’m going to outline step by step what enables a company to deliver those ideas.
I have spent years researching what capabilities are actually required to facilitate and deliver innovative ideas, and have tested and refined these ideas with some of the world’s largest companies while I was an innovation subject matter expert at the world’s largest Management Consulting firm.
In this article, I am going to show you what it really takes to have innovation succeed at any company.
The Three Dimensions of Innovation (by Nick Skillicorn)
In order for innovation to be possible, a company needs to have the following foundational elements:
- Enablement: The creativity and culture to develop new and different ideas. This includes capabilities that need to be possible in every individual in the company.
- Delivery: A team of people who have the ability to take rough ideas and develop them into a customer-facing innovation.
- Management: A flexible approach to management and governance which enables leadership to understand direction and progress, but gives authority to the team to do their best work with reduced bureaucracy.
- Leadership: Guidance and support from executives in the company to build an organisational culture where new ideas can be pushed
As you can see from the visualisation below, these foundational elements fit into the three primary groups of people responsible for various aspects of innovation (Delivery, Management, and Leadership), while the Enablement stream is applicable to all people in an organisation.
This is what I call the 3 Dimensions of Innovation.
I published the first draft of the 3 Dimensions of Innovation all the way back in 2013. This new version has been refined based on extensive feedback and research over the years with companies, leadership, team members and thought leaders across the world.
What is important to remember is that innovation is not the responsibility of any one of the specific groups mentioned above.
In order for it to succeed, a company needs to have strength in all three pillars and the enablers.
For example, a project team with strong capabilities to deliver innovation can be prevented from succeeding by a management team with inappropriate governance processes. Or a capable management team may waste time and effort building an inappropriate innovation portfolio of projects if the leadership team has not communicated a clear innovation strategy.
Each Dimension is connected to the others, and a lack of capabilities in any single one can prevent success overall.
Each of the 3 Dimensional pillars and enablers also has its own set of activities which the members of that group need to successfully execute in order for innovation to succeed. These are the capabilities we are about to explore now.
So, what are the actual capabilities which teams need to innovate?
The 23 capabilities every company and team requires to innovate successfully
In this image, I show you the full list of 23 capabilities required to succeed at developing successful innovations:
These 23 capabilities are as follows:
1. Delivering innovation Capabilities
These are the activities and skills which are required for a team to ideate, design, test, iterate and pilot a new innovation. The full list of capabilities is:
- Identifying core challenges & perceived value: Getting a clear understanding of not only what issues a solution should address, but also what potential customers perceive as the value of existing solutions (including yours and those of competitors). This will ensure that an innovation is being developed to actually deliver value to a customer.
- Idea Generation: Generate creative new ideas that address the identified challenges, beyond basic brainstorming exercises
- Idea Evaluation and Prioritisation: Figuring out which ideas have more potential than others, and which fit the strategic goals
- Lean Innovation Project Management: Putting in place a structure which teams can use to focus limited time and energy on progressing ideas quickly, and validating progress
- Developing, Experimenting, Prototyping & MVPs: Quickly developing low-resolution versions of the solution to get feedback, iterating and adjusting the solution based on feedback, experiments, and failures
- Pilot and Iteration: Testing the solution in a small scale environment and adjusting it based on customer feedback and demand
2. Managing Innovation
These are the activities and processes which are required to successfully prioritise, manage and scale the various innovation opportunities to bring value to the company.
- Ways of innovating & Business Models: There are more different ways to innovate than just “make your product better”, and more business models than “sell the product”. Effective innovators are trying to find multiple ways to innovate in order to cumulatively add value in new ways.
- Sensing & understanding trends: Awareness of the demands and trends in your market based on new technology (both inside and outside your industry), new competitors and customer experiences
- Prioritisation & Portfolio Management: Ability to manage a pipeline of ideas and projects, identifying which ideas will help the company achieve its short, medium and long-term innovation goals, and ensuring that the portfolio has a balance of incremental, adjacent and transformational innovations.
- Management, Funding, Governance & KPIs: A flexible management and governance system which empowers teams to experiment and make progress rapidly, yet still giving senior leadership ability to track and validate progress against all projects in the innovation portfolio and ensure these align with the innovation strategy
- Facilities & Locations: Project teams are provided with space, spaces, equipment, and tools to run their required innovation experiments
- Launch, Integration & Scaling: Identifying the most effective ways to ensure the changes from the innovation can scale once launched, either by making adjustments to the way the core business operates or scaling independently at the edges of the company
3. Leading Innovation
These are the capabilities required for the entire organisation to work in the same direction and have the ability to spend time on innovation productively.
- Innovation Strategy & Communication: Leadership have made the choices about which innovation questions and challenges their teams should answer (and as a result, the choices about which will not be prioritised), how this should be done, as well as communicating this in a way that all members of the organisation understand how success will be judged
- Ambidextrous Organisations & Operating Models: Clarity on who is responsible for delivering and managing innovation in the organisation, and how they interact between themselves and the rest of the business along the journey
- Time, Resources & Funding: The organisation provides the resources required for people to devote time and run experiments around innovation
- HR, Performance Review & Recognition: How new people with new ideas and different experience are brought into the company, how contributions are assessed and rewarded, and whether there are any formal (or informal) processes which punish the less predictable aspects of innovation and may scare people away from innovating
- Ecosystems, Acquisitions & External Innovation: How a company fits into the wider ecosystem required to get their offering to the customer (including suppliers, distributors, retail channels, competitors, the public sector, startups and the customer), as well as finding ways to innovate through cooperation outside of the company
- Culture, Purpose & Driving Change: Creating an environment where people feel like they are making a worthwhile contribution, and they have the ability to innovate and their ideas are heard. Also a culture where change is expected and supported
These are the capabilities and mindsets required by everyone in the organisation.
- Understanding & Managing Creativity: The basis of what triggers the best divergent and convergent ideas, how to improve the frequency and quality of these ideas, and how to get all people to break beyond the evolutionary biases which hold them back from their creative potential
- Psychological Safety & Risk Perception: A climate where people believe it is possible, expected and valued, that they speak up with relevant ideas, questions, concerns and even mistakes, in addition to having the bravery to make choices which have the potential to fail
- Authority: The ability to follow through on activity for which you have responsibility, without having to get undue additional approval in advance
- Action based on Insights: A predisposition towards making things happen and delivering, supported by relevant data and insights to ensure movement is in the right direction
- Continuous Learning, Development & Change: A growth mindset which supports people in developing new skills, knowledge, capabilities, and belief in what more they can achieve
In order for any company to succeed at innovation, it needs to have foundational strength in each of these 23 capabilities.
There will be situations where for your particular company some capabilities are more important than others, especially depending on the size or industry of the company. For example, a startup with only a few dozen employees and a single product may have a smaller innovation portfolio than a multinational corporation, and a completely vertically integrated company may have fewer external partners with whom to map their innovation ecosystem.
Next, I’m going to show you the two ways to assess your current innovation maturity against the capabilities in the 3 Dimensions.
How to assess your current innovation capability maturity
It is not enough to just understand the list of the 3 Dimensions of Innovation your company needs.
It is more important to understand which capabilities your company already has, and which ones are lacking and therefore are holding you back from succeeding.
Therefore, it is vital that your company conducts a health check or maturity assessment to determine where there are capability gaps, and whether to invest in improving them.
I usually recommend assessing the capabilities against a simple Red-Amber-Green (Traffic Light) system, which makes communicating the strengths and gaps (or opportunities for improvement) simpler to decision-makers.
This would result in a simple Innovation Maturity Assessment like the one below:
So how do you go about assessing your company’s maturity against each of the 23 capabilities?
There is a quick and dirty way, and a more thorough way.
Assessing innovation capabilities: The quick and dirty way
If you have limited time or budget to assess your innovation capabilities, you can do it using a workshop (or virtual workshop).
Here, you would do the assessment yourselves (or preferably with the help of a trained facilitator) over the course of 1-2 days.
The steps for each workshop are as follows:
- Attendees should include at least 3 people representing each of the three pillars (Delivering, Managing, Leading).
- Each person individually assesses the company against each of the 23 capabilities on a scale of:
- 0 – Don’t know / Non-existent (Red)
- 1 – Displays some weak aspects (Red)
- 2 – Company does this reasonably well (Amber)
- 3 – Company does this very well, especially compared to the industry (Green)
- Each person individually also writes down all Red Flags they see for any of the 23 capabilities (e.g. examples of where things are not going well)
- Scores can be tabulated into a spreadsheet to automatically calculate the averages, split between pillar groups
- Read aloud the overall final score results, as well as each and every red flag example
- Discuss the results and implications of the voting scores and red flags
- Formulate a plan of action, by selecting which capabilities should be addressed first
Tip: Try to find reasons and examples for your capability being of low maturity. Not knowing of examples of high maturity is usually a sign that things are not very mature yet.
Assessing innovation capabilities: A thorough innovation maturity assessment
For best results, it helps to bring in an external expert to provide an unbiased view of your company’s capabilities.
This would involve not just getting your teams’ opinions of the company’s current innovation maturity level, but also bring more structure to explain why a capability was given a specific maturity rating.
Through developing the 3 Dimensions of Innovation framework, I was required to formulate what a “strong” capability represented.
So for each of the 23 capabilities, there is a more detailed Innovation Maturity Assessment framework to provide guidance on what would classify your company as being Red, Amber or Green.
To illustrate, I have included one of the assessment questions around the capability of Prioritisation and Portfolio Management below:
A thorough assessment would take several weeks, during which time would be spent gathering evidence and insights from people across the organisation in order to provide a more nuanced final assessment score.
This would also then provide insights on which of the capability gaps could be addressed first in order to unlock latent innovation potential.
How to improve your innovation capabilities
Once you know which capabilities you already have strength in and which you want to improve, it is time to take action.
What will it take in order to actually improve your innovation capabilities?
This will be different for each company, but it is important to select a small number of capabilities to focus on improving.
If you try and improve everything at once, it is like trying to swallow the ocean. It is unmanageable.
Instead, try to pick between 5 – 8 capabilities which will be your focus for the first round. What should also become clear is which capabilities can be developed in a complementary way.
If you are planning on asking for an external expert for help: Always consider which of the 23 capabilities this external expert actually have experience with developing. When many companies say they can help build innovation capabilities, what they actually mean is they can help you learn about new ways to brainstorm or use design thinking. Challenge them on whether they can help deliver the exact capabilities you are looking to build rather than just what they are selling, and beware of vague answers.
The list of 23 Innovation capabilities above is deliberately designed to be modular, so that you can select only those capabilities which should be improved in each pillar or framework, and mixed between pillars. It is the ideal framework for developing a modular approach of innovation improvement priorities.
How long it takes to see an improvement in innovation capabilities
Some capabilities require longer to change, as they may have extensive existing processes and cultural artifacts that need to be identified and redesigned.
Other changes can be made much more rapidly, either by shifting the mindset of people through new knowledge or unlocking issues that have blocked innovation by having the right decision made.
Therefore, capabilities can be split by how long it will take to make a noticeable difference to the performance of your company (bearing in mind that each company is different).
Capabilities can either be improved through:
- Workshops (W): These capabilities can unlock new ways of working through training in a few days
- Sprints (S): These capabilities can be improved by working with the team to identify and change processes, usually taking a few weeks or months
Many capabilities can also have a lot of value by first delivering by a workshop to identify changes, and more added value through follow-up sprints to deliver the changes.
Outlined in the image below are the recommended allocations of which of the 23 capabilities in the 3 Dimensions of Innovation can be improved through workshops, sprints, or a combination.