Engineers have and will always play a considerable role in the ability for business to innovate, whether from the standpoint of statistical analysis and design to the more visionary customer/client-facing roles of sales and management. No matter the role of an engineer, innovation as the life-blood of corporate success is something that is often difficult to define, understand and codify in a meaningful way, although several notable attempts have been made.
Take, for example, the concept of the “three horizons framework”, as outlined originally in 1999’s The Alchemy of Growth, in which it is suggested that growth and innovation should be leveraged over three organizational “horizons”:
- Core business – what the company is mostly associated for and from which it derives the majority of its profits and cash flow.
- Emerging opportunities – entrepreneurial endeavors within the organization that indicate substantial profit but may require additional investment, and
- Future long-term growth opportunities – smaller projects such as R&D and pilot or experimental programs.
A 2012 Harvard Business Review article expands upon this theme further and introduces the concept of the corporate “innovation portfolio”; defining an overall strategic view of managing the collective processes by which companies might manage the ways they produce value.
Based upon research, the authors of the article suggest that in terms of resource allocation, 70 percent might be devoted to incremental innovation, 20 to adjacent innovation and 10 percent to disruptive/transformational innovation within each of the above horizons, respectively.
But while this 70/20/10 split may be the answer for a larger, more established business, they do posit that the size of the organization is also a factor (they suggest that a mid-sized company might look more like 45/40/15). No matter the size of the company in question, however, the reality is that the of time, itself, causes priorities to continually be re-evaluated and changes to be managed. With this in mind, the allocation of resources in regard to managing innovation becomes quite dynamic.
Resource allocation for innovation is just the beginning; managing innovation within each horizon requires its own unique blend of skills and processes. Success at the incremental end of the spectrum is all about making products better, faster, and cheaper and is dependent on the ability to respond to customer needs, anticipate demand based upon analytics, manage change processes, and implement solutions in a timely fashion.
Disruptive innovation is entirely different. It relies on a more visionary and conceptual approach to identifying new technological or market opportunities, persuading the right influencers to become early adopters, rapidly iterating designs to achieve product/market fit, and being able to pivot when core assumptions are proven incorrect.
Any worthwhile endeavor requires the ability to manage innovation. It is and will continue to be the challenge for all companies past, present and future. Keys to success include, but are not limited to:
- Understanding the innovation landscape of the organization
- Making sure skills, processes, and tools match the type of innovation project at hand
- Relentlessly monitoring for new opportunities
- Communicating organizational objectives, and
- Committing to activities which keep talent engaged.
When executed perfectly, the result is a mix of projects that resemble a sound investment portfolio. Incremental innovation projects provide a foundation of short-term dependable growth while adjacent and disruptive projects are the high-risk, high-reward activities that are a necessary element of long-term business viability.