Innovation For The HR Professional
Here’s what you need to know.
Posted on 01-22-2019, Read Time: Min
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When you entered the HR field, and as you have acquired different HR certifications, were you expected to be an innovation expert? Probably not. But today, innovation is one of the top three priorities of CEOs globally. And increasingly, HR is expected to drive innovation through talent acquisition, talent management, and talent development. After all, innovation comes from people!
In this series on HR and Innovation, I am proud to bring you a Primer on Innovation. In this first article, you will learn the basic concepts and terminology that you need to know in order to (a) hold your own in an innovation-related discussion, and (b) expand your role in driving innovation in your company.
In upcoming articles, we will cover:
- How to Hire More Innovators
- How to Drive a Culture of Innovation; and,
- How to Design and Lead Innovation
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Today, innovation is one of the top three priorities of CEOs globally. |
A Primer on Innovation for the HR Professional
What is innovation, anyway?
Today the term “innovation” is bandied about in almost every setting. From innovative HR software to innovative pet grooming! The term “innovation” is so ubiquitous that it probably deserves greater clarity.
Definition of Innovation:
Innovation is the process of developing novel solutions to either existing or new opportunities. Successful innovation results in market adoption and increased societal and commercial benefits, as compared to the status quo.
Why is innovation so important today?
There may be four reasons why we are hearing the term “innovation” more often today than in the past:
Today the term “innovation” is bandied about in almost every setting. From innovative HR software to innovative pet grooming! The term “innovation” is so ubiquitous that it probably deserves greater clarity.
Definition of Innovation:
Innovation is the process of developing novel solutions to either existing or new opportunities. Successful innovation results in market adoption and increased societal and commercial benefits, as compared to the status quo.
Why is innovation so important today?
There may be four reasons why we are hearing the term “innovation” more often today than in the past:
- One reason is that in the developed world at least, our basic needs have largely been met. To continue to grow the economy, companies need to find new needs to meet or invent them. The rest of the world is now exposed to middle-class lifestyles through online and social media, and many aspire to leapfrog the traditional stages of economic development (as Africa did by adopting cell phones faster than the developed world). These forces drive the appetite for innovation.
- The second reason we hear more about innovation today is that certain technologies, like software and the internet, have made it much easier and faster to innovate. If we were still in the Industrial Era, we’d have to innovate by altering physical materials, which is way more difficult, costly and time-consuming. Now almost anyone can code a website or a mobile app and get it to market. This makes innovation more feasible.
The third reason we hear more about innovation today is that certain highly innovative companies — like Apple, Amazon, Google, Tesla and Netflix — have captured the imaginations of the public and business press. Yes, their founders have been glamorized by the media. But it’s also these companies’ extraordinary market capitalizations, achieved in less than a decade, that have shifted what it means to be successful in business. This makes innovation more desirable.
Finally, in every generation, there are cultural norms. In the 1950s, the ideal was the “Organization Man.” The man (usually) who followed the rules, fit in, was consistent at all costs. This made sense at a time when the nation was in the grips of the Industrial Era. Today, the cultural ideal is the Innovator. Flexible, creative, globally-aware and tech-forward. These days, it seems, everyone wants to be an innovator!
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The most innovative companies in the world enjoy much higher market capitalizations per dollar of revenue. |
Finally, in every generation, there are cultural norms. In the 1950s, the ideal was the “Organization Man.” The man (usually) who followed the rules, fit in, was consistent at all costs. This made sense at a time when the nation was in the grips of the Industrial Era. Today, the cultural ideal is the Innovator. Flexible, creative, globally-aware and tech-forward. These days, it seems, everyone wants to be an innovator!
Six Kinds of Innovation
There are at least six different kinds of innovation. The one we hear most about is product innovation, where a company brings out a new “thing.” Like the first smartphones, the first self-driving cars, the first 3-D printers. Product innovations can be inherently “wow.” They look great in photographs, so they are conducive to news coverage.
But new products are not the only kind of innovation. There is also Service innovation, Process innovation, Technical innovation, Marketing innovation, and Business model innovation. Some businesses like Uber and Airbnb incorporate several of these kinds of innovation and manage to create entirely new markets. Let’s briefly define, and give an example, for each of these kinds of innovation:
But new products are not the only kind of innovation. There is also Service innovation, Process innovation, Technical innovation, Marketing innovation, and Business model innovation. Some businesses like Uber and Airbnb incorporate several of these kinds of innovation and manage to create entirely new markets. Let’s briefly define, and give an example, for each of these kinds of innovation:
Service innovation
Definition: Creates a novel and useful service.
Example: TaskRabbit lets you hire a worker to perform a service, such as assembling your IKEA purchase for you. Dry bars only style your hair. No cut or color.
Example: TaskRabbit lets you hire a worker to perform a service, such as assembling your IKEA purchase for you. Dry bars only style your hair. No cut or color.
Process innovation
Definition: Changes an internal process to substantially improve it, through greater efficiency, savings or reduced friction.
Example: One of the most famous and groundbreaking examples of process innovation is Henry Ford’s invention of the world’s first moving assembly line.
Example: One of the most famous and groundbreaking examples of process innovation is Henry Ford’s invention of the world’s first moving assembly line.
Technical innovation
Definition: A fundamental technical breakthrough (that may or may not reach the market unless applied to a compelling use case.)
Example: Millimeter-wave technology reflects light off of water molecules in our bodies. It has many uses, from airport security scanners to 3D physical measurement of body shape for apparel design, prosthetic devices design, ergonomics, entertainment, and gaming.
Example: Millimeter-wave technology reflects light off of water molecules in our bodies. It has many uses, from airport security scanners to 3D physical measurement of body shape for apparel design, prosthetic devices design, ergonomics, entertainment, and gaming.
Marketing innovation
Definition: A novel way to go to market, or to promote a product or service.
Example: $1 Shave Club allows men to order razors on a monthly, recurring basis. The founder’s online video ads also broke marketing conventions with their bold, in-your-face style and went viral.
Example: $1 Shave Club allows men to order razors on a monthly, recurring basis. The founder’s online video ads also broke marketing conventions with their bold, in-your-face style and went viral.
Business model innovation:
Definition: A novel transaction model, use of assets or partners that often creates an entirely new market. Highly disruptive of incumbents.
Example: Airbnb and Uber were early examples of businesses that leveraged ubiquitous smartphones and wifi, as well as assets owned by others (spare rooms, cars otherwise left idle).
Example: Airbnb and Uber were early examples of businesses that leveraged ubiquitous smartphones and wifi, as well as assets owned by others (spare rooms, cars otherwise left idle).
Innovation Horizons
Even within one kind of innovation, you will find varying degrees of newness or novelty. This continuum of newness can be organized into four “innovation horizons,” from Continuous Improvement to Disruptive Innovation. Novelty should be interpreted in context. An innovation may be new to a company, new to a category, or new to the world.
The four horizons of innovation are:
Continuous Improvement
Continuous Improvement is sometimes not even considered innovation at all, but more process improvement. Many companies primarily pursue Continuous Improvement because it is the most familiar, involving tweaks to known processes, technology or known markets for existing customers.
Incremental Innovation (Horizon 1)
This is the practice of developing new features, new flavors, new sizes for an existing product or service. It involves more unknowns than Continuous Improvement, as it may require different supply chains or may appeal to a slightly different customer. Mini Oreos appeal more to young children, for example, than full-sized Oreos.
Adjacent Innovation (Horizon 2)
This is the process of exploring adjoining opportunities to your core business. Examples include a carbonated beverage company that enters the snack category. The customer may be the same, but the manufacturing and merchandising systems are not. You can throw sodas on a truck and drive them across the country. Sodas have long shelf lives. Not so for chips.
Disruptive Innovation (Horizon 1)
Also called Radical Innovation, this innovation horizon is furthest from the core business. Thus Disruptive Innovation involves the most uncertainty. Examples include the first electric cars (who needs gas stations?). And the first private space travel for individuals.
Just like when you’re investing in stocks and bonds, companies need to pursue a balanced portfolio of “asset classes,” with initiatives in all four innovation horizons. As with investments, higher risk is correlated with higher returns:
The four horizons of innovation are:
Continuous Improvement
Continuous Improvement is sometimes not even considered innovation at all, but more process improvement. Many companies primarily pursue Continuous Improvement because it is the most familiar, involving tweaks to known processes, technology or known markets for existing customers.
Incremental Innovation (Horizon 1)
This is the practice of developing new features, new flavors, new sizes for an existing product or service. It involves more unknowns than Continuous Improvement, as it may require different supply chains or may appeal to a slightly different customer. Mini Oreos appeal more to young children, for example, than full-sized Oreos.
Adjacent Innovation (Horizon 2)
This is the process of exploring adjoining opportunities to your core business. Examples include a carbonated beverage company that enters the snack category. The customer may be the same, but the manufacturing and merchandising systems are not. You can throw sodas on a truck and drive them across the country. Sodas have long shelf lives. Not so for chips.
Disruptive Innovation (Horizon 1)
Also called Radical Innovation, this innovation horizon is furthest from the core business. Thus Disruptive Innovation involves the most uncertainty. Examples include the first electric cars (who needs gas stations?). And the first private space travel for individuals.
Just like when you’re investing in stocks and bonds, companies need to pursue a balanced portfolio of “asset classes,” with initiatives in all four innovation horizons. As with investments, higher risk is correlated with higher returns:
- Continuous Improvement and Incremental Innovation (H1) often comprise 70 percent of companies’ investments but tend to deliver only about 10 percent of a company’s ROI.
- Adjacent Innovation (H2) comprises 20 percent of investments and delivers about 20 percent of a company’s ROI.
- Disruptive (H3) comprises 70 percent of investments yet it returns about 70 percent of a company’s ROI.
Investing too much in Continuous Improvement and Incremental Innovation will suppress your company’s long-term growth potential.
Investing too much in Continuous Improvement and Incremental Innovation will suppress your company’s long-term growth potential. |
Corporate Innovation Strategies
Companies tend to have a core competency or approach that they repeatedly exploit in innovation. There are three such core competencies or approaches: Tech Drivers, Need Seekers and Market Readers.
Some companies excel at Technical innovation (e.g. Google). They may prefer to develop the tech themselves, but will also acquire any components needed, if it helps them get to market first.
Others are called Need Seekers, actively engaging with customers to detect and meet their needs (e.g. Procter & Gamble).
And finally, some companies are Market Readers or “Fast Followers.” For example, Huawei is a Market Reader or Fast Follower. They may not be first with new core technologies or recognizing emerging needs, but they excel at quickly adapting to market conditions. Fast Followers license or acquire more of their technology than Tech Leaders, so they have to be good at “Open Innovation.”
OK, what is that? Open Innovation is an approach that contrasts to the old “silo mentality” of traditional in-house R&D labs. Open Innovation is a “paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology.” Most companies today have some kind of Open Innovation strategy, but Fast Followers especially must excel at Open Innovation.
While we all may want to be Tech Drivers, the reality is that all three strategies can be equally effective.
Some companies excel at Technical innovation (e.g. Google). They may prefer to develop the tech themselves, but will also acquire any components needed, if it helps them get to market first.
Others are called Need Seekers, actively engaging with customers to detect and meet their needs (e.g. Procter & Gamble).
And finally, some companies are Market Readers or “Fast Followers.” For example, Huawei is a Market Reader or Fast Follower. They may not be first with new core technologies or recognizing emerging needs, but they excel at quickly adapting to market conditions. Fast Followers license or acquire more of their technology than Tech Leaders, so they have to be good at “Open Innovation.”
OK, what is that? Open Innovation is an approach that contrasts to the old “silo mentality” of traditional in-house R&D labs. Open Innovation is a “paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology.” Most companies today have some kind of Open Innovation strategy, but Fast Followers especially must excel at Open Innovation.
While we all may want to be Tech Drivers, the reality is that all three strategies can be equally effective.
Innovation Stages
There are some common stages that innovations pass through on the way from the proverbial “back of the cocktail napkin” sketch to reality. This is true regardless of the innovation strategy, what kind of innovation (product, marketing, business model), or which innovation horizon mix your company pursues. These stages are commonly grouped into the “Front End of Innovation” (ideation and product development) and “Back End of Innovation” (commercialization). There are whole conferences dedicated to the Front End vs. Back End of Innovation!
Here are three common stages, and the abilities needed in each:
Ideation Stage
At the ideation stage, companies need the ability to gain insight into customer needs and an understanding of the potential relevance of emerging technologies.
Product Development Stage
At the product development stage, companies need an ability to engage actively with customers to prove the validity of concepts and to assess market potential and risks, and the ability to leverage existing product platforms into new products.
Commercialization Stage
At the commercialization stage, companies need an ability to work with pilot users to roll out products carefully but quickly and to coordinate across the entire organization for an effective launch.
Here are three common stages, and the abilities needed in each:
Ideation Stage
At the ideation stage, companies need the ability to gain insight into customer needs and an understanding of the potential relevance of emerging technologies.
Product Development Stage
At the product development stage, companies need an ability to engage actively with customers to prove the validity of concepts and to assess market potential and risks, and the ability to leverage existing product platforms into new products.
Commercialization Stage
At the commercialization stage, companies need an ability to work with pilot users to roll out products carefully but quickly and to coordinate across the entire organization for an effective launch.
How HR can Become Indispensable to Innovation
Now that you know these basic innovation terms and concepts, you’re ready to go learn more about innovation at your company! You may find that innovation is centralized or distributed at your firm. If it’s centralized, you may have a CINO (Chief Innovation Officer), or someone appointed to head the Innovation Center of Excellence (iCOE). You may have Innovation Centers or Labs. Other companies believe that innovation is everyone’s responsibility. They may engage in internal crowdsourcing to solicit ideas from employees at all levels. It may be a mix of all of the above. Go find out how your company structures for innovation. Try to get a handle on how mature these programs are, and how results are measured.
The role of HR will vary depending on how innovation is structured in your firm. If innovation is centralized, the CHRO (or equivalent) should form a strong bond with the CINO. If innovation is decentralized, driven at the business unit level, then HR partners in each BU may have more chance to influence direction. One caution: When innovation is driven at the BU level, it may tend to be focused on shorter-term initiatives that can hit the bottom line within 1-3 years, and longer term, bigger bets may be deferred for lack of central sponsorship and funding.
Once you determine how innovation is structured at your company, find out what innovation leaders need from HR, including:
The role of HR will vary depending on how innovation is structured in your firm. If innovation is centralized, the CHRO (or equivalent) should form a strong bond with the CINO. If innovation is decentralized, driven at the business unit level, then HR partners in each BU may have more chance to influence direction. One caution: When innovation is driven at the BU level, it may tend to be focused on shorter-term initiatives that can hit the bottom line within 1-3 years, and longer term, bigger bets may be deferred for lack of central sponsorship and funding.
Once you determine how innovation is structured at your company, find out what innovation leaders need from HR, including:
- What is the company’s primary innovation strategy?
- What is the company’s ideal and current mix across the Innovation Horizons?
- Does the company try to drive a Culture of Innovation? If so, how? How is it measured? Is it working?
- Do leaders know who their innovators are? How are they identified?
- Does the company currently hire for innovation skills?
- Does the company include innovation in selecting High Potentials?
- How does the company develop innovation talent?
- Are there different career paths for innovators?
- How do leaders currently design innovation teams?
- How do they reward innovation?
- How does the company measure innovation outcomes?
We will address some of these topics in subsequent articles on HR.com, so please check back in the coming weeks. And please let us know if there is an innovation-related topic you’d like us to address for HR professionals.
Author:
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Suzan Briganti is CEO and Founder of Swarm Vision. Swarm Vision is a software-as-service platform to identify, organize, develop and leverage innovation talent in the enterprise to drive growth. Suzan brings 25 years of experience in research, strategy and innovation. She has grown Swarm Vision from a garage start-up to a trusted solution provider to global Fortune 500 clients. Suzan leads Swarm Vision with a focus on building great products and teams. Suzan has an MBA summa cum laude from Boston University and a design degree from Italy. She serves on the International Standards Committee for Innovation Management, representing the United States. Suzan is a frequent writer and speaker on innovation in the workplace.
Connect Suzan BrigantiFollow @swarmvision Visit www.swarmvision.com |
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