How to Build an In-house Innovation Capability

Organizations striving to build in-house innovation capabilities, grounded in design-thinking, lean startup or another innovation practice, aimed at shifting mindsets and instilling new practices to drive customer centricity and rapid-prototyping is nothing new.

Having spent the majority of my career building these capabilities and now helping others build theirs, I’ve uncovered a path that successful organizations, no matter the industry, follow to build their innovation capabilities.

This is the first in a series of articles focused on the path to building a successful in-house innovation capability. In this article, I’ll lay out the path and the fundamentals of it at a high level to set a foundation. Subsequent articles will dig into the elements of the path and how to push your organization through it.

What are the marks of a successful innovation capability?

Before we get to the path, I want to highlight the two measures for a successful innovation capability.

The first is the ability to execute ideas spurred from the innovation capability. I use execution, because all too often organizations adopt design-thinking or lean startup and become good at getting ideas out, but struggle to actually see those ideas become reality.

Second, is the level of integration that the innovation capability has throughout the organization. Similarly, I use integration, because without it, innovation is being practiced in a vacuum with no link back into the organization, which leads to minimal impact or change.

There are 4 stages along the path and each stage sets the foundation for the next. Meaning, that jumping into a stage (ex. solidifying a process by setting up an innovation lab, accelerator, or the like to explore new ideas, without first finding their way and moving up the integration axis) inevitably leads to the innovation capability struggling to make a difference.

Visually, it’s clear that early efforts focus on integration and then shift to execution. However, both factors need to remain top of mind and incrementally improved as you progress.

While building the innovation capability there are also elements that should be put in place behind the scenes.

A clear exploration strategy to guide efforts of the innovation capability on where to play and how to win, as well as the new ventures that come from it. A board to select which ventures are pursued, determine how resources are allocated to them, track the portfolio of ventures and be the link back to the organization.

Within each stage, there are types of programming to achieve the goals of that stage and push further along the path.

Treating your innovation capability like a hypothesis to test

Successfully moving through the stages requires you to make assumptions and generate hypotheses to test the programming you implement.

What I mean is, as you progress along the path, try different programs within each stage, determine what success looks like and measure progress towards that. Then after running your program each time, make changes based on what you learnt or pivot to another program that makes more sense.

Treat the development of your innovation capability just as you would a product or service going through the design-thinking or lean startup process.

Now, let’s take a quick look at what’s going on in each stage.

  1. Finding your way

This is where innovation theatre, the fact that workshops with sticky notes and frameworks are often delivering more theatre than actual results, is at its highest and can derail your efforts.

Your organization needs to figure out what elements of design-thinking or lean startup make sense for differing parts of the organization and at the same time, teach and spread those new ways of thinking about problems to deepen integration.

Workshops alone won’t get you there, so start testing the waters with programming to get ideas out and put design-thinking and lean startup to the test with real projects. Perhaps a company-wide call for ideas to solve a pressing leadership challenge, followed by coaching on how to begin validating those ideas.

2. Solidifying a process

Inevitably, more process and rigour is needed to drive execution, because you’re mainly focused on integration through the first stage, and setting up the behind the scenes (strategy, board, alignment, etc.) pieces.

As you test and iterate on your program to get ideas out, begin solidifying what that process is, so the organization becomes familiar with it, and at the same time, strengthen the level of rigour behind it.

Rigour, via milestones and business model focused practices outside of design-thinking and lean startup, will create the data that doesn’t already exist for your new ideas. This is what the organization needs to see to trust the process.

Eventually, ideas will become new ventures that are ready to pilot and inevitably run into the challenge of going beyond prototypes to commercialization at your organization.

3. Going from ideas to execution

Your focus now goes from establishing a process to generate ideas and create new ventures to changing internal processes that will support your innovation capability.

The first part is streamlining the old processes and requirements for developing a new product or service. Talk to brand, legal, compliance, etc. to understand what the bare minimum they need from new ventures to get them in customer’s hands and collaborate with them to update processes based on the new reality your innovation capability is establishing.

The second is to build an infrastructure of support with business units to garner their resources, i.e. engineers, designers, etc. Resources dedicated to the explore function are needed, and your board will play a big role here, but you can help by aligning your process to the business unit needs to garner buy-in. Also, use the board to get balance sheet dollars dedicated to new ventures and not operations dollars, which are already allocated.

4. Structural change

The next challenge will be figuring out where new ventures and the employees behind them will live.

The exploration process will have churned out several new ventures by this point, with some going to market either as a standalone product / service or addition to an existing. Your board will need to put measures in place for deciding to spin out ventures, attach them to existing business units or create new lines of business based on fit.

Finally, for the explore function to truly operate effectively, changes to the organizational chart to reflect a dedicated explore function that can act autonomously will be needed.

For example, have two functions below the CEO. One that is focused on running core operations and another that explores new ventures. Each has their own structure within the organization.

To sum it all up, there is a path for organizations to follow to build a successful in-house innovation capability. Always drive towards integration through the organization and the ability to execute ideas. It’s difficult to jump ahead in stages, because the foundation of the previous stage is necessary. Finally, maintain and experimentation and testing mindset as you progress.

If you’d like to learn more about Arrisio and how we help companies move along the path, visit the Arrisio website and keep an eye out for future articles in this series!