The Innovation Opportunities Map

In small organizations some of these megaprocesses may be combined or may just be a part of someone’s job, but they are distinct functions, and each of them provides opportunities for innovation — ways of doing very different things (product innovation), or doing things very differently (process innovation). Most innovation models layer on additional ‘types’ of innovation, most commonly technology innovation (how the resources of the organization are applied to produce its products) and business model innovation (“how the organization makes money”). Some innovation models offer as many as ten different types of innovation. I’ve never been terribly happy with all these different ways of parsing the innovation ‘landscape’ because they don’t relate well to what people actually do. I’ve concluded that the simplest way to capture the entire ‘landscape’ of innovation opportunities is to describe these opportunities according to (a) which organizational megaprocess(es) they most relate to, and (b) whether they are strategic innovations (those that must be decided upon by management, since they are outside the purview of front-line people in the day-to-day operations of the organization and require organization-wide change to implement) or tactical/operational innovations that can be (and frequently are) introduced by front-line people in the organization in response to an obvious or emerging customer need.

I’ve marked strategic innovation opportunities with an S and tactical/operational innovation opportunities with a T, on the map above.

The advantage of this model is that it provides a framework for systematically thinking about and surfacing innovative opportunities in your organization, and also provides a framework for assessing disruptive innovation risk — the innovation opportunities which competitors or new entrants into your industry or sector might introduce in their organizations that could cost you customers. Here’s a walkthrough of the map with some examples in brackets:

1. R&D Innovations: At a strategic level, these include the introduction of completely new product categories (software companies going into the VoIP business), service wraparounds (adding OnStar services to your cars), customer redefinitions (a company that sells tools deciding to make just tools for women), new markets (a consultancy in Montreal deciding to offer services in Spanish and focus on the Latin American market) and new product ‘platforms’ (creating a suite of products all of which use a standard peer-to-peer data-sharing technology). At a tactical/operational level, these innovations include new products or substantial enhancements to an existing product, or use an existing platform, and new product performance attributes (biodegradable plastic bags, Smart Cars that fit sideways in a parking space).
2. Sales & Marketing Innovations: At a strategic level these include the decision to offer single-source buying to customers (e.g. become brokers for a complete line of products in addition to those you make yourself, and create a catalogue that includes them all) and new pricing and customer financing models (offering a base product free and making money on the customization and the services related to that product, or leasing to the customer instead of selling). At a tactical/operational level these include developing new sales channels (online, catalogue etc.), creating new brands (iPod), online or self-service innovations for customers (“customers who liked that book also liked this one”), and customization and segmentation innovations (spy thrillers custom-printed to use your name as the hero, or offering species types and packages of your financial services to new immigrants).
3. Sales & Customer Relationship Innovations: At a strategic level these include outsourcing sales or sales support functions to a specialist, and innovations around the customer experience (the Harley-Davidson customer ‘communities’ that increase affinity and virally market the products). At a tactical/operational level they include teaming sales and customer support (integrated service instead of a ‘hand-off’), customer training innovations (rock climbing walls in sporting goods stores), and innovative complaint resolution processes (rewarding customers as ‘innovators’ if their complaint results in improvements to the product that are commercially implemented).
4. Purchasing Innovations: At a strategic level these include new quality/cost trade-off decisions (Japanese car-makers, and at the other end of the scale Wal-Mart’s supplier price-bullying), and insourcing or acquiring a supplier (to eliminate supplier markup and get better assurance of reliable supply). At a tactical/operational level they include new materials (microfibre, light-weight, strong materials for portability), and new suppliers (Zara’s switch from offshore suppliers to closer, more loyal domestic cottage-industry tailors and sewers for their fashions).
5. Asset Management Innovations: At a strategic level these include asset financing innovations (getting your suppliers to finance and maintain your retail inventories, or letting the employees own the plant) and leasing innovations (leasing part of your largest customers’ facilities instead of buying your own). At a tactical/operational level they include ‘smart’ inventory management systems that allow you to buy just in time without risking stockouts, and RFID tagging innovations that let you track exactly where your assets are.
6. Production Innovations: At a strategic level these include ‘lean’ manufacturing methods that optimize use of your resources and people’s time, and outsourcing production (e.g. to manufacturers who have excess capacity or to ‘shared’ manufacturing specialists). At a tactical level they include self-managing work teams and many of the other people-based, peer-suggested production innovations that companies like WL Gore and Semco have implemented.
7. Delivery Innovations: At a strategic level these include packaging innovations (industrial shrink-wrap that melts and biodegrades in water) and the use of new delivery channels (using eBay, or selling direct rather than through expensive retailers). At a tactical level they include just in time delivery methods that companies with limited inventory space will sometimes pay big premiums for.
8. Life Cycle Management Innovations: Most companies no longer think of the delivery of the product as the end of the ‘sales cycle’; it extends to the ultimate disposition and replacement of the worn-out product (with your company’s newest product, of course). At a strategic level these innovations include ‘cradle-to-cradle’ product management (Interface’s strategy of maintaining ownership of the carpets it installs at customers’ premises, maintains and replaces throughout the life cycle), and insourcing customers’ asset management (tracking, automatically restocking and looking after a whole category of your customers’ purchases for a flat monthly rate). At a tactical level they include repurposing and resale innovations (creating markets for customers’ used products; recycling, trade-in and trade-up programs).
9. Management Innovations: These are innovations that affect many or all megaprocesses in the organization. At a strategic level they include vertical integration and expansion decisions (buying out your supplier or customer and expanding operations to include what they do), new organizational structures (flat, decentralized, self-managed organizations with no titles and no fixed job descriptions), business location innovations (putting your store inside an existing store), outsourcing of back-office functions (to companies that specialize in accounting, HR, IT etc. and which hopefully do these jobs better than you could, until we reach a World of Ends in which every company does just one or two things really well), and innovative alliances (several companies with synergistic competencies create a joint venture and contribute their most innovative people to it). At a tactical/operational level they include organic (internally driven) culture changes to the organization, where the organizational culture will permit this (each employee sets her own goals and defines her own role, shares them with her self-selected workteam, and the team collectively determines what they are prepared to put in and what they need to get out of their work — a self-motivating organization where the only job of the small ‘management’ team is to offer help to improve effectiveness and to solve problems brought to their attention.

What do you think of this model? Does it help you, or your clients, to think more creatively and holistically about innovation opportunities for your/their organization? Does it help you pinpoint vulnerabilities in the organization that could allow competitors or new entrants to wreak havoc on your, or your clients’, business? And if your organization, or your client, is already innovative, does this provoke some ideas and opportunities that might allow it to sustain and extend that Innovation Advantage?