{"id":35599,"date":"2025-01-29T15:59:46","date_gmt":"2025-01-29T15:59:46","guid":{"rendered":"https:\/\/prophet.com\/?p=35599"},"modified":"2025-02-12T15:41:39","modified_gmt":"2025-02-12T15:41:39","slug":"building-a-sustainable-business-innovation-capability","status":"publish","type":"post","link":"https:\/\/prophet.com\/2025\/01\/building-a-sustainable-business-innovation-capability\/","title":{"rendered":"Building a Sustainable Business Innovation Capability\u00a0"},"content":{"rendered":"\n
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Building a Sustainable Business Innovation Capability<\/h1>\n\n\n\n

Innovation is hard and often requires a particular model for success: active, hands-on capability building. <\/p>\n<\/div>\n\n\n\n

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Half of CEOs rank new business building as a top three priority, and in the current economic environment, incumbents are advantaged over startups with relatively easy access to capital<\/a>. While they are advantaged financially, they are often disadvantaged by their operating model. As Arthur W. Jones famously said, \u201cAll organizations are perfectly designed to get the results they get.\u201d Many organizations reach a point where they realize that what got them to where they are is not what will ensure their future success.  <\/p>\n\n\n\n

To win in today’s market, big companies need to move at the speed of growth<\/a>. That means they need to experiment boldly, then convert successes into new capabilities at scale. They must learn to move faster at every step of their business innovation process: speed to customer insight, speed to strategy, speed to market, speed to impact, and – finally – speed to a new capability that can operate as a new, scaled business<\/a>. <\/p>\n\n\n\n

What sets today apart is the rapid evolution of generative AI, altering the business terrain \u201cslowly and then all at once,\u201d to echo Hemingway. This swift progression presents equal parts opportunity and threat, yet instilling a sense of urgency around such technologies remains a challenge. The slow erosive impact of past technological advancements, like digital commerce and big data analytics, often desensitizes leadership to the acute needs of the moment. The dilemma persists: Is the best method to pursue widespread innovation across the organization, or should innovation be quarantined in specialized units?  <\/p>\n\n\n\n

Many organizations have tried at least one of these methods in the past, and many have vacillated between them. At 3M, they tried to infuse innovation across the organization, but ended up with too many SKUs, without business rationale to justify a slew of new product innovations. More recently, the pendulum has swung the other way and their CEO has announced they need to accelerate new product development again<\/a>. To insulate innovation from a potential drag from the core culture, American Family Insurance set up Tenney 110, a corporate venture studio stationed outside the core business. After a stint investing in external Insurtech startups, American Family Insurance leaders better understood gaps in the market. Further, they realized an in-house studio would enable them to bring their \u201cunfair\u201d advantages to the table to better serve their stakeholders (e.g., data, talent, capital, technology, access to customers). However, when funding and resources became constrained, and leadership did not provide adequate support from the top<\/a>, the assets that made an in-house studio advantageous could no longer overpower the corporate inertia. <\/p>\n\n\n\n

In fairness, this is a dilemma that has been felt both by clients and consultants seeking to aid them. Clients have tried many methods, and they haven’t been alone in those endeavors. Over the years at Prophet, we’ve delivered ‘culture of innovation’ engagements for a company’s core business, and we’ve also helped to design centralized innovation functions that have subsequently struggled. <\/p>\n\n\n\n

What do organizations – both clients and consultants – that have tried both methods realize? That innovation is hard work and sometimes it requires a very particular model for success: active, hands-on capability building. Capability building means framing a clear ambition, an operating model and an organization designed to reliably enable the delivery of business innovation, in collaboration with the core business.  <\/p>\n\n\n\n

To do this work, we bring our innovation expertise across the Human-Centered Transformation Model<\/a>. This includes many ready-to-use frameworks that have proven successful in organizations of varying sizes and industries. These frameworks are highly durable, meaning that more effort can be spent on the unique innovation challenges and opportunities within a specific organization rather than reinventing the wheel when it comes to innovation methodology and capabilities. <\/p>\n\n\n\n

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DNA<\/h2>\n\n\n\n

We define the organization\u2019s DNA as the core ambition that should not change, ensuring everyone is aligned on the same target destination and direction of travel. This is an essential, yet often overlooked, foundational element. When an organization has a DNA problem, employees do not understand where they are going or when they will get there.  <\/p>\n\n\n\n

A recent study<\/a> reveals few companies have established a meaningful link between innovation and their overall corporate strategy or strategic intent. For many companies, innovation is perceived to be an expensive, time consuming, non-essential activity. Aligning around a clear and compelling ambition for innovation within or outside the enterprise can remedy this disconnect.  <\/p>\n\n\n\n

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\u201cIf innovation is not rooted in moving the purpose forward, then it exists for its own sake. Anything that exists for its own sake must continually justify its existence. And that lends itself over time to subjective scrutiny because the people around it can\u2019t see how it\u2019s moving our purpose forward.\u201d 

Michael McCathren, Sr. Principal, Enterprise Innovation, Chick-fil-A <\/strong><\/p>\n<\/blockquote>\n\n\n\n

Framework 1: The Ambition Template<\/h3>\n\n\n\n

The Ambition Template aligns the organization around a specific, measurable, transformative and timebound target destination. We unpack each part of the ambition with x-rays, and those x-rays then lead to KPIs. With this template, everyone understands what outcome is expected from innovation activities, and by when. <\/p>\n\n\n\n

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BODY <\/h2>\n\n\n\n

Next, we align the organization to the vision by co-designing a fit-for-purpose operating model, governance, processes, systems, and tools. If an organization has a body problem, then it feels too hard to get things done. <\/p>\n\n\n\n

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 \u201cA corporate innovation function must have disciplined governance and operating models so executive stakeholders have continuous engagement with how the team is driving applied impact.\u201d 

Mark Jamison, Senior Vice President, Visa Inc. <\/strong><\/p>\n<\/blockquote>\n\n\n\n

Framework 2: Innovation Capability Model <\/h3>\n\n\n\n

The innovation capability model ensures the organization is building the capabilities needed for always-on innovation, from inspiration and investment to portfolio management and governance. Each of the 11 capabilities are based on underlying services. For example, the inspiration capability included safaris to learn innovation best practices, a speaker series to connect internal business leaders to external thought leaders, and hackathons to regularly source new ideas across the organization. <\/p>\n\n\n\n

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Framework 3: DERPA <\/h3>\n\n\n\n

Based on the innovation capability model, we determine the critical disciplines needed to progress new ideas through funding stage gates towards MVP and launch (or being halted as quickly as we can determine that it will not generate enough business value). Those skills include design, engineering, research, product management and analytics<\/a>.   <\/p>\n\n\n\n

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Framework 4: Pods <\/h3>\n\n\n\n

The operating model includes a studio of multidisciplinary \u201cpods\u201d each in charge of progressing a single idea and staffed with relevant disciplines. In addition, there is a portfolio management function in charge of determining which new ideas move into a pod, as well as inside-out and outside-in inspiration functions in charge of sourcing new opportunity areas for future innovation.  <\/p>\n\n\n\n

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Framework 5: H2A <\/h3>\n\n\n\n

The hypothesis-to-action process, run in two-week sprints, ensures that all ideas are assessed fairly and killed as quickly as possible to re-allocate funding to more promising ideas.  <\/p>\n\n\n\n

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MIND <\/strong> <\/h2>\n\n\n\n

Mind work includes the skills and competencies that the organization needs to operate the body. If you have a mind problem, you don\u2019t have the right people to run the processes and contribute content and subject matter expertise.  <\/p>\n\n\n\n

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\u201cThe talent that you select is the single most important decision that an organization can make. It is a very different talent profile to drive true innovation versus managing a core organization. They need to be able to take risks, be analytical to make data-driven decisions, embrace diverse people and diverse experiences and be comfortable challenging the status quo.\u201d 

Lisa Rometty, CEO, Zerigo Health<\/strong> <\/p>\n<\/blockquote>\n\n\n\n

Framework 6: Basadur Innovation Profile <\/h3>\n\n\n\n

Mind work often includes using the Basadur Innovation Profile to increase awareness of how individual and collective preferences for different parts of the innovation process can impact the work and continuously delivering just-in-time teaching of new skill problem solving skills. This may include opportunity mapping, design research, business design and rapid prototyping and testing. At the end of each quarter, we codified our learnings and shared new methods for use within and beyond the innovation organization. <\/p>\n\n\n\n

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SOUL <\/h2>\n\n\n\n

Finally, the Soul motivates individuals inside of the innovation function by forging new rituals to work productively while also ensuring team health. If an organization has a Soul problem, employees don\u2019t believe leadership is committed to transformation because their behaviors do not reinforce the ambition. Important leadership behaviors include separating process from content and championing agile ways of working for business activities, adding increment planning, sprint kickoff meetings and daily standups serving as forums for process discussion, and sprint closeouts and office hours provided adequate time and space to solicit feedback on work products.  <\/p>\n\n\n\n

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\u201cThere\u2019s a certain amount of irreverence and risk tolerance that innovation leaders need to have. You have to be able to be strategic, but still be able to quickly pivot and flex, with a dogged determination to push through barriers. And you know you\u2019re going to have barriers! You need to have team members who see barriers more like a speed bump or sales objection rather than an unchallengeable stop sign \u2013 a problem to be solved – and that\u2019s a unique mindset.\u201d 

Boris Pluskowski, Managing Director, Head of CXO Platform, HSBC<\/strong> <\/p>\n<\/blockquote>\n\n\n\n

Framework 7: SCARFS <\/h3>\n\n\n\n

Innovation brings new ways of working and often sees employees working at pace and at the edge of their capabilities. As such, regularly checking in on team health and how individuals are processing the experience is essential. Our team uses the neuroscience-based model known by the acronym SCARF<\/a> to evaluate how teams are doing across six key elements of psychological safety, satisfaction and productivity. We have improved it for innovation purposes, adding a second \u201cS\u201d to understand the individual and collective sustainability of our pace. <\/p>\n\n\n\n

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While all these practices are essential to collective success, one of the most critical practices is that our team doesn\u2019t design and walk away. We think of key roles within the operating model as \u201c2-in-a-box,\u201d meaning a member of the Prophet team is paired with a client so that learning and application is in real-world work, not merely a theoretical application in a workshop. This approach allows everyone to win and learn.  <\/p>\n\n\n\n

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\u201cInnovation leaders build trust and credibility in an organization by delivering outcomes and the 2-in-a-box model is an accelerant.\u202f By pairing innovation experts with talented insiders, the learning pace and time to results are exponentially faster with higher quality.\u201d 

Diane Teed, Principal, Innovation, Brown Brothers Harriman & Co.<\/strong> <\/p>\n<\/blockquote>\n<\/div>\n\n\n\n

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