Source: Bosch Rexroth, Factory of the Future

When Successful Firms Forget How to Innovate

George Fankhauser
Sep 17 · 5 min read

From product innovation to innovation systems and the role of software

While advising clients in innovation projects we frequently encounter organizations transforming their innovation systems and organization “on-the-go”. In recent projects we had the situation that traditional, well-doing companies have forgotten how to innovate. Some of these firms date back more than a 100 years and have seen significant phases of growth, all associated with innovations across many types but mostly with new products.

How come they forgot?

When assessing firms regarding their ability to innovate it is often found that traditional companies are able to preserve their heritage and strong DNA across generations of the workforce. Loyal specialists pass their knowledge on and on. Innovators in such companies may become lonely hurdlers in labs, service units, development departments and other organizational units. Especially in small to mid-sized firms (SME) the roadmaps exhibit fluctuating, long cycles of product updates and add-ons followed large-scale projects with critical deadlines and high expectations regarding their innovation, customer impact and market success.

Moreover, digitalization of business is accelerating and not stopping from any part of the value creation and sharing process. In our daily work we get a lot of requests to “help with software” projects that are neither delivering on their promise nor are creating value as expected once introduced.

In one case of a manufacturer of high-end tools for the b2c market, the DNA of the company was still very hardware-centric and business processes are improved here and there. The core business is experiencing issues with unconnected hardware, unmaintained software, increasing technology debt as well as complexity that hinders cost and performance innovations. Innovators within the company face not only the hard task to launch into demanding Horizon 2 projects (H2) for growth segments but have to remove hurdles related to unaligned incremental innovation (H1).

Implementing radical innovations for H2, combined with software issues in traditional non-software companies leads 99% of them into long and costly learning cycles that can be avoided.

While there is not a single recipe for success, critical factors include strongly positioned roles such as product owners and architects while using consistent processes in a disciplined way.

The central role of software platforms

At the portfolio level roadmaps are quickly in focus to find out how core products as well as new services interact with each other. Building complex end-to-end products in a connected world dominated by software is no longer possible in isolated projects but must build upon software platforms that are structured and layered to optimally balance re-use of commercial, open-source and proprietary components.

Coming from organizations dreading software as #1 problem such clients quickly step up to become able to master changes in an agile way. As software is developed as an evolution built on a sound platform base this thinking will positively influence other disciplines as well.

Business will profit dramatically as the evolutionary cycles will uncover new learnings during the customer journey. Using a proven innovation framework — not just a process — will finally connect strategy, initiatives, product management and development.

From innovation projects to enterprise-wide innovation systems

Once organizations master multiple projects and platform roll-outs we often get the request how to institutionalize the success patterns. Or, how can we act as an innovative organization with a steady stream of ideas, inventions, and innovations? Working in streaming or pipelining mode makes sure the way of success and innovation is not forgotten.

The way to ensure such a working mode is to employ an innovation framework. In contrast, a process is just part of that. While the framework describes all kinds of activities and capabilities, the software-related aspects differ quite a bit when applied to the discovery and execution phases:

  • Discovery is focused on learnings, data and validation of hypotheses through experimentation; the experiments help to define a problem further and quantify an approach. Software applied here relates to low-res prototypes, landing pages, facades or simulated business processes.
  • Execution is about adding value to the solution and enhancing it; also here iteration is key to verify the solution does what it must do. Classical agile and DevOps organizations provide the right processes and tools to crank out MVPs, prototypes, solutions for beta-testing and after go-live a continuous stream of versions improving the customer experience.
Innovation framework: strategy, people, processes and tools affecting software development. Roadmaps, portfolios and projects are synchronized across the “3 horizons”.

When working on software innovations a strategy update for the digital world is usually needed as a prerequisite. Once in place software roles regarding different innovation aspects have to be defined and assigned:

  • Overall strategy and business model: is software the business itself or just an enabler? Does it need additional sales and support skills once conceived? Are strategic and financial goals aligned?
  • Type of innovation strategy: do we need hackers (as in hackathon) or site gurus for existing large scale services? What is the maturity of the solution landscape?
  • Innovation strategy chosen matching objectives and direction: do developers need to think leading edge or will proven technology achieve the same targets? What is “old” software lacking, and, can it be at least partially be reused? What would an architect with good business judgment tell you?
  • Leadership regarding innovation: how do software people drive growth? Is M&A and assessing existing solutions important? What about integration?
  • Types of innovations used, potential of new and complementary types: beyond services, business model, operational innovations or hardware complements require different skills than for the existing solution.
  • Personas (different innovators at work, predominant culture within the enterprise): last but not least, to uncover needs and to create value calls for learning persona intermixed with building and organizing persona.

In a nutshell, with more projects going “digital”, software reviews, innovation frameworks and systems become more important. Sometimes they get even dominant in terms of pressure for launching and need for new growth.

Find more updates on innovation management in software platforms.

George Fankhauser

Written by

George is an innovation consultant for Sensaco GmbH, based in Zürich. Read more and contacts at http://innovationmanager.ch/en/blog .

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