Innovation Capacity
By Anthony E. Bynum, MBA, MDM
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Anthony E. Bynum |
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My family recently moved into a new home. After getting the essentials for survival out of boxes, we left everything else in the garage. After a few weeks, I was ready to move everything from our garage to its final resting place in the basement. I had a lot of boxes and little time. My intent was to make as few trips as possible from the garage to the basement. To accomplish this, I consolidated items from several boxes in order to make the journey with fewer, fuller loads of items. However, as I was consolidating my loads, I began to wonder how much each box could hold before collapsing from the weight within, or before I would be unable to carry the extra weight. I began to consider the risk associated with this approach. I had limited time, weight capacity and patience. I thought about my situation in the following way:
Intent—to make as few trips as possible
Ambition—maximum number of objects in each box as possible
Risk—the box might break
By pushing my threshold for risk and increasing each load to maximum capacity, I took eight trips and roughly an hour to complete my task—not bad! Much better than carrying the original 14 boxes from the garage to the basement.
Looking back on this experience I began to see parallels between this and corporate innovation initiatives. How often do we see organizations with high hopes of changing the game within their industries, only to find they lack the ability to take the risks necessary to satisfy their ambition?
This led me to consider if there was a way to assess the right degree of innovation for a particular organization, or to find a way to facilitate a discussion about the level of comfort an organization has with addressing its risk threshold. To build on my box-moving experience and make a conversation about ambition and risk more tangible, I came up with the following equation, IC = SI – RT.
Innovation Capacity = Strategic Intent minus the organization’s Risk Threshold
Getting an organization to discuss innovation in the context of their strategic intent and their tolerance for risk in a more quantifiable way would mitigate the risk of coming up with new business ideas that are too ambitious for a cautious organization or not ambitious enough for a company that can leverage its existing success.
A descriptive look at these variables provides a clearer look at how the interplay of intent and risk may impact a company’s overall capacity to innovate. Below is a simple two-by-two diagram that helps to define the character and strategic behavior an organization may carryout given their variable profile.
Innovation Capacity (IC)—an internal measure (self defined), of an organization’s current potential to innovate, in consideration of what it wants to achieve.
Strategic Intent (SI)—the organization’s articulated degree of change it wants to achieve in a particular market or industry. This should be a statement authored and supported by the organization’s leadership.
Risk Threshold (RT)—is the result of a quantitative assessment of an organization’s ability to financially and operationally act on its stated intent. Factors that can impact RT can be an organization’s capital structure, cash flow, asset investment, cultural aptitude for risk, etc.
Thinking about IC in this way provides a framework for thinking about the tension between an organization’s need to grow and evolve in the context of its stakeholders, customers and employees. At some level, IC is one of several forces that can serve to shed light on an organization’s culture, values and beliefs.
IC = SI – RT
The use of this framework can bring structure to the types of questions an organization should address to better guide innovation initiatives. Below are some preliminary questions associated with each component in the IC equation. Because all organizations and markets ascribe to a unique set of drivers and success metrics, the points listed below are intended as thought-starters only. They are neither mutually exclusive nor completely exhaustive as listed.
| Innovation Capacity (IC) |
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Strategic Intent (SI) |
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Risk Threshold (RT) |
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| Expressed in terms of time. Addresses the question of how much and when. |
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Expressed in terms of vision and mission. Addresses the question of why, how, what. |
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Expressed in terms of degree of risk. Address questions of return, opportunity costs and investment. |
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| What do you want to accomplish over time:
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Are we simply trying to compete more successfully within our current core offerings?
Do we want to play the game better than our competition?
Are we interested in building new capabilities?
Do we want to change the way the game is played? |
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What competitive risks must we consider?
What’s the risk to our brand/product/service?
What are the financial/capital risks that we have to consider |
Volumes of books and writings exist that explore the myriad variables that come together to shape an organization’s innovation activities. The aim of this article is to offer a diagnostic lens that can be used to establish a baseline for innovation planning. We encourage further discussion and exploration of the idea of IC and the variables that drive it. Please share your thoughts and adaptations to the model. Through dialogue, we can all increase our innovation capacity.
Tony Bynum
For over 20 years Tony has worked with companies and organizations to design, develop and manufacture innovative products and unique design solutions. His professional experience includes strategy development, implementation of product development information systems, experience design, and retail strategy. A true design thinker, Tony frames and explores the competitive and market forces that impact an organization’s ability to deliver sustainable innovation. Tony practices a human-centered and contextual approach to innovation and strategy. By blending insights from business factors, social science, and technology, Tony helps clients identify opportunities for disruptive and sustainable product and market differentiation. Tony embraces intuition as a tool to reframe challenges and envision future possibilities. As an Innovation Planner, Tony’s strengths lie in identifying white space opportunities, leveraging competitive advantage, development of proprietary insights and frameworks, systems thinking, and strategic platform development.
To
ny holds an MBA from Lake Forest Graduate School, as well as a Master’s Degree in Human-Centered Design Methods with a focus in Innovation Planning from IIT's Institute of Design. Tony has completed Master’s level course work in Organizational Psychology & Development at The Chicago School of Professional Psychology. Tony is a Director at-large in the University of Chicago’s Innovation Roundtable and serves on the Business Management Advisory Council at Capella University. Tony was the Vice President of Marketing for the Chicago Chapter of the PDMA (Product Development Managers Association) from 2005-2007 and serves as an adjunct faculty member at the Institute of Design. Tony frequently presents on the subject of Design Innovation at Northwestern University in Evanston, IL, and acts as an informal advisor to several SMBs in Chicago and the Midwest. Tony enjoys serving as a mentor to students in the fields of Business Strategy, Innovation and Design. Tony is married and lives with his wife and daughter in Wadsworth, IL, where he enjoys "thinkering," outdoor sports, and martial arts training in his free time.
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