How Knowledge Drives Innovation

A couple of years ago, I shifted the focus of my consulting business from knowledge management (for which executive enthusiasm is definitely on the wane) to innovation. It didn’t take long before I realized the two are inseparable: Knowledge and imagination are the primary drivers of innovation in organizations. This article shows the connection between knowledge and innovation, and why KM competencies and capacities are essential to any organization aspiring to be innovative.

I should probably start with a definition of innovation. Mine (adapted from the Doblin Group’s) is:

The world’s most innovative companies, such as WL Gore, have created processes, systems, practices, and organizational structures that enable them to innovate continuously, as part of their organizational culture. Such companies are, alas, few and far between. But they are also, not coincidentally, among the world’s most knowledgeable companies: knowledgeable about how the world works and what’s happening in markets and sciences and arts far removed from their core business. They are less concerned with what is happening in their own markets and industries because they are leaders — their competitors are constantly kept off-guard by their innovations and struggling to know what these innovators know. Copycat products, repackaged products and incremental improvements are not innovation.

This chart summarizes the high-level complex-system innovative process (understanding; engaging customers, co-workers and communities; organizing; imagining; designing; experimenting; realizing; and, throughout these other seven steps, continuously paying attention, listening, observing, exploring, discovering, inquiring and canvassing) that most innovative companies use. Knowledge continually informs each of these eight steps in the process.

This chart contrasts the information flow in traditional organizations (top) versus innovative organizations (lower graphic). Innovative organizations are constantly scanning broadly for new ideas that can be adapted for innovative purposes. Their ‘information professionals’ job is to ‘make sense’ of the information from both primary (interviews and surveys) and secondary (Internet and information media) sources. These organizations share what they learn as a matter of course, in the knowledge that sometimes brilliant innovations come from serendipitous learnings. And these organizations engage their customers in continuous dialogue, to co-develop solutions through a knowledge exchange of needs and ideas.

The graphic at the top of this articles represents the knowledge-powered innovation process we helped put in place at one of our clients. This client was facing fierce competition from inexpensive offshore manufacturers, and they knew that if they didn’t innovate they would die. The process includes these twelve key components, most of which are knowledge-driven:

• Current State Innovation Assessment: A comparison of the organization’s current innovation processes compared to leading practices and compared to the high-level complex-system innovation process described above. A number of process improvement ideas came out of this assessment.
• Differentiation Assessment: Competitive intelligence was used to create a strategy canvas comparing the company’s key competitive advantages and disadvantages with those of its major current (and threatening) competitors. This assessment drove some major changes to the organization’s strategy, and how it decided to differentiate itself through a series of innovations.
• Innovation Training: Teaching all employees of the organization how to participate in making the company more innovative.
• Innovation Lab: The creation of an opportunity for employees to ‘play’ with ideas and surface and explore potential innovations. This lab started with a summary, provided by management, of What’s Keeping the CEO Awake at Night, the key challenges and risks the company was facing. Employees were given a set of tools and resources on their desktops and in a designated area of the plant, to play with, to see if they could resolve some of these challenges and risks. Most important, they were given paid time and permission to ‘play’. 
• Idea Markets: Using a form of Open Space (much like the Collective Complex-Environment Problem Resolution Process summarized in this article), employee groups and key customers co-developed solutions to some of the organization’s most pressing problems and customers’ identified unmet needs.
• Customer Anthropology: We taught the customer how to invite themselves to observe key customers’ use of their (and their competitors’) products, and how to conduct that observation using leading-edge customer anthropology techniques.
• Need/Affinity Matrix: Drawing on the customer anthropology learnings, they created a Need/Affinity Matrix summarizing key unmet needs and customer segments that had those needs, as part of the process of assessing the market for innovations.
• Think the Customer Ahead Sessions: Events were planned to which ‘pathfinder’ (leading edge thinker) customers were invited, to explore (a) what’s keeping customers’ CEOs awake at night, (b) key trends and market changes affecting these customers, (c) how these customers’ customers’ needs will likely evolve in the near future as a result, and (d) consequently, how these customers’ needs for our client’s products will likely evolve. Nothing quite like seeing the future now.
• Seeing What’s Next Program: The organization’s researchers were taught to identify and surface future changes likely to affect the company, drawing on the Seeing What’s Next sources suggested by Drucker, Porter and Christensen. 
• Continuous Environmental Scan: The researchers were also taught the key steps to conducting a continuous environmental scan: (a) identifying a broad range of primary and secondary sources to read, track and survey regularly, (b) assignment of knowledgeable staff to interpret and summarize information from these sources, (c) compilation of these interpretations and summaries into an internal Ideas Newsletter, and (d) conducting regular Implications Sessions to discuss the ideas and opportunities presented by the ideas in the Newsletter.
• Tapping the Wisdom of Crowds: We hope eventually to establish a process for canvassing the ‘crowd’ (a selected group of employees, customers and trusted advisors) using a Wisdom of Crowds process that will provide the client with a sense of which innovations are most likely to be successful, which risks are most likely to be problematic, and which learnings are most likely to be important to the organization’s future.
• Imagineering: We taught the client how to ‘imagineer’: (a) creating a ‘story’ for each innovation idea to help envision how it could work, (b) combining and aggregating innovation ideas together into logical ‘service offerings’, and (c) using a combination of imaginative and critical thinking to explore and qualify (or disqualify) each innovative idea. This process proved to be very effective for filtering and prioritizing the ideas that surfaced from the various innovation programs described above.

The final step in the innovation process is the rigorous stage-gating process (to ensure the ideas, no matter how intriguing, are strategic and economically feasible), and an equally rigorous commercialization process, to take the successful ideas from the drawing board into reality and operation.

I think it’s pretty clear that good knowledge processes and resources are not only advantageous, but absolutely essential, to most of the twelve innovation activities described above.
Many large organizations are surprisingly un-innovative, perhaps because with a large market share and shareholders demanding double digit annual increases in profit they can’t afford the investment in lead time to bring true innovations to market. This is why innovation is the entrepreneur’s most valuable competitive advantage. A combination of good sources of knowledge and people with great imaginations, channeled into some or all of the twelve innovation activities described above, can help any company powerfully differentiate itself from competitors and disruptively innovate the industries in which it operates. There isn’ta better formula for success.