Knowing where you are as a company
Companies embark upon innovation initiatives with a great deal of energy and a high ambition level. It is not unusual for the enthusiasm to fade as time goes by. The company is often unaware of the success factors of innovation and of its own ability to define the preconditions for success.
An example from the Utilities sector …
In the Utilities sector in the Netherlands all the major electricity companies had sky-high ambition levels when first exposed to market forces. They thought that they had after all built up a good relationship with several million customers over the years. How easy would it be to offer various new home-related products and services to loyal customers and so develop new business. In practice these companies seem to have their hands full innovating their existing services in a way that is in line with the market. For example, simply being accessible by telephone for queries about the electricity bill. Nearly all the new initiatives directed at consumers have been halted, despite huge investments.
These businesses had too high a Business Innovation ambition level in relation to their ability to innovate. Success is determined by awareness of a realistic ambition level in combination with self-knowledge of your ability to innovate.
A company wants to innovate to bring about a distinctiveness for the customer. Innovation can be translated into the innovation of various factors. The result of an innovation can be a new product or a new channel, a new market or a combination of these factors. The value proposition for the customer increases as a consequence of an innovation in the order of product, channel and market level. The impact will increase exponentially if the innovation is applicable at several levels at the same time. We call this a “Blue Ocean” development.
Methods and tools for determining the correct ambition level
The ambition level of innovation is the framework within which the process of creation and the generation of ideas will take place. This process is directed in part by the outcomes of the impact analysis. The company analyses the different trends and the strategic choices for dealing with this impact.
The trends give an insight into the social developments, into what the customers want in the short and long term and into how this will influence their behaviour. The company needs a method and tool to spot trends and to analyse the impact:
With the Innovation Radar Screen the impact is made business-specific. Trends are related to the estimated change on the measuring instrument. The organisation can use this to manage the results (for example the Balance Scorecard instrument).
With the Strategic Innovation Scenario planning method the impact of the trends can be translated into possibly different innovation scenarios. A trend indicates a likely development. Of course a number of key uncertainties remain in a market, the outcome of which is difficult to gauge. Think of the development of the economic climate (rich years versus lean years). The actual outcome of this key uncertainty will have a major impact on the ultimate development of the innovation. A low price of a new product at a time of lean years for example will be very important. In the rich years on the other hand service and quality have a bigger part to play. An innovation scenario is built up on the basis of possible outcomes of key uncertainties. These uncertainties have a major impact on the operating result of the company. The planning method enables a company to cluster relevant trends for each scenario and to translate them into the behaviour of the consumers. The expected reaction of the businesses in the market sector can be indicated for each scenario. With this insight a company can decide for which scenarios adjustments are needed in the current value proposition. In this way concrete innovation initiatives, such as product, channel and market innovations can be defined. The overall review of the scenarios and the strategic choices of the company determines the ambition level for innovation.