Innovation Portfolios and Experimentation for Corporate Innovation

While it can be challenging to integrate innovation and experimentation into the DNA of your organisation, implementing a strategic framework or ‘innovation portfolio’ will help your teams decrease ambiguity, be more agile and de-risk uncertainty.

Having worked with high-profile clients across a range of industries to help them deliver actionable innovation strategies, we’ve adapted the key principles of lean entrepreneurship into our very own methodology —  The Lean Corporate Innovation framework. This four-step process is all about translating lean entrepreneurship into corporate environments to empower innovation and intrapreneurship. 

What Are Innovation Portfolios?

An innovation portfolio is a tool for converting strategic priorities and measurable goals into a series of defined innovation projects. As a strategic framework, innovation portfolios consist of a number of initiatives categorised and spread across two variables. These are usually selected based on the strategic imperative and desired direction. For example, initiatives could be categorised based by:

• Target markets: is the initiative targeting a new market or a market where you operate as a company already? 
• Capabilities: is the initial planning to use existing capabilities or technologies that you already own, or you need to hire/acquire new ones?
• Time horizons: are you expecting to see returns from the initiative in 2 years, 5 years or more?
• Business model: are you modernizing the core business, or changing the game entirely? 

Each of the innovation initiatives constitutes a series of experiments which intrapreneurs will execute to contribute to your company’s innovation effort and successfully transform a vision into reality. 

Here at Studio Zao, we like to think of innovation through the lens of a surfer. While embracing corporate innovation and surfing the high seas might seem completely unrelated, we’ve identified some fundamental concepts that ring true across both.

Throughout this article, we’ll refer to this analogy to demonstrate how innovative organisations can ride ‘waves of change’ by considering the following four principles of The Lean Corporate Innovation framework:

1. Know Why You Need to Be Lean and Innovate Now

The unprecedented rate of change in today’s business means markets and industries are in constant flux. The rise of cutting-edge technologies generates a storm of unpredictable and increasingly frequent waves of innovation.

Reduced marginal costs associated with technical innovations mean the frequency between each wave of change or ‘paradigm shift’ will get shorter and shorter as new technologies arise.

Whether it’s adopting artificial intelligence to reshape labour markets, embracing blockchain to change the way we trust technology, or adapting to the outbreak of COVID-19, constant waves of change demand an agile and highly-adaptive approach.

Burning Platforms

Much like a surfer must twist and turn to stay afloat, we like to think of innovation as the ability to ride these ‘waves of change’ and make the most out of the changing conditions.

Crucially, all good surfers (and intrapreneurs) will spend years to perfect their technique and commit hours of practice into overcoming new challenges. Once you’ve got the right mentality and approach to conquer the rough seas, you need to define which new waves you want to surf.

Before you can embrace innovation, it’s essential to identify the key metrics that are triggering your need to embrace innovation. These often materialise as a ‘burning platform’ determined for example by reduced margins or decreased market share.

Burning platforms create a real, immediate crisis and they are often generated by previous resistance to innovate. Although each senior manager’s aim should be to avoid them at all cost, burning platforms provide the perfect trigger to stimulate innovation and encourage your business to ride waves of change and thrive in the future.

2. Creating an Innovation Thesis

Once you have clarity on the metrics that are generating your need to innovate, and you fully appreciate the evolution happening in the competitive, technological and customer behaviour context that is generating your burning platform, it’s time to fully understand what the future will look like.

Much like scientists use experimentation to test a hypothesis, innovators must start by identifying an innovation thesis that they want to test.

An innovation thesis is an aspiration or, more optimistically, a prediction that will fulfil your company’s innovation aspirations. We like to express innovation thesis by using the Design Thinking technique of “How Might We?” questions. 

For example, an output for a strategy workshop we run for sportswear apparel brands part of Pentland was:

• How might we help people engage more with sports?
• How might we help disabled people to be more active?
• How might we make wellness more holistic?

Innovation theses are grounded on a vision for the future of your company. We usually adopt a speculative design approach to define them. Speculative design is a design method able to address big societal problems and look towards the future — and enable practitioners to create products and services for those scenarios. 

In order to define workable How Might We questions, in three steps we need to proceed to identify what the probable futures will look like:

• Possible Futures. At first, we list all the wildest predictions of what the future might look like for your company. This is a classic exercise where no judgement is required and creativity is appreciated as well as out-of-the-box thinking. Possible futures include the kinds of futures that “might happen” – even Star Wars’ hyperspace travel, for example. Possible futures might also involve transgressions of currently-accepted physical laws or principles.
• Plausible Futures. Then we tone down the excitement by a notch. Starting from the wildest possible future predictions, plausible futures cover those scenarios which “could happen” according to our current knowledge of how things work. They stem from our current understanding of the market, technology, consumer behaviour, physical laws, production processes, etc.
• Probable futures. Finally, we ground aspirations to reality. Starting from the plausible futures, we list down the scenarios that are considered “likely to happen”. These are the scenarios that stand a good chance of becoming a reality in the not so distant future. We will focus here from now on.

Defining strong innovation thesis through powerful and inquisitive How Might We questions will allow you to map out your journey, understand how to move away from burning platforms and propel into the future.

3. Visualise A Strategic Roadmap

Once you’ve identified a clear thesis of what innovations are relevant to your organisation and where you need to focus your attention, visualising a strategic roadmap is vital to establish milestones, develop KPIs, and delegate responsibilities across your innovation team.

Throughout this stage, you want to use experiments to define tasks and create a series of initiatives that span across multiple horizons. Achieving real change takes time.

While the term ‘experiment’ is derived from the scientific approach and has been borrowed from the Lean Startup methodology as a technique to achieve innovation in startups, it can also be used within large organisations as long as it’s supported by a broader framework.

When touching on experiments, the Lean Entrepreneurship principles includes four main steps, which are consistently repeated.

1. Hypothesis/Innovation Thesis. “I believe something is true.”  During the hypothesis stage, identify what needs to happen to make your new product or innovation initiative a success. Visualising your ideas is a useful way to make sense of assumptions.
2. Test. Use a series of fast and affordable experiments to put your assumption to the test and learn from the results. 
3. Measure. Collect metrics to assess whether or not your assumption was true and gather insights on how to improve or adjust your hypothesis.
4. Learn. Harness this process as a series of lessons to make informed decisions, validate claims, and inform your approach for future experiments. Once you’ve reached this stage, you can reform your hypothesis and start the process again.

If we think back to the surfing analogy, this step of building your innovation portfolio is all about choosing the best route to take as you paddle beyond the breakers. You start paddling in one way, to discover that the bottom of the sea is covered in rocks. That was an experiment, from which you learnt that you are not on a good surfing spot. Then you paddle in another direction, another experiment. This time the learning is that you can wait for your wave to come. 

Use experiments to plot a path and think about how to bring others with you on the journey, taking into consideration that some of them might fall in the water as their experiments may fail.

During the early stages of your innovation journey, you want to focus on experiments that could generate quick wins, as it takes time for people to get used to new ideas. These quick wins will allow you to create a network of champions, success stories and set the foundation for achieving a bigger impact.

A successful roadmap of experiments and innovation initiatives will strike a balance between quick wins, slow-moving success stories and radical process reconfigurations that could take years. Keep a careful eye on return on investment (ROI) and how you can drive forward-thinking initiatives alongside financial growth.

Crucially, during this stage, you want to establish clear ownership of specific projects and move forward with a strategic plan of attack.

4. Build Ambidextrous Innovation Leadership

Ambidextrous leadership is essential for succeeding at innovation as it’s essential to strike a balance between ‘business as usual’ tasks and experimental work.

Team leaders must provide their people with the freedom to organise their own schedules and offer guidance to help them stay on track. Crucially, ambidextrous innovation leadership involves building safe spaces where intrapreneurs are free to explore imaginative ideas, without feeling confined by day-to-day responsibilities.

Balancing Team Objectives

Innovation teams must find their rhythm by balancing iterative experiments with reporting, internal communications, and BAU process responsibilities. Some companies like Google, for example, have been known to reserve 20% of their employees time for new projects.

While individual intrapreneurs require creative freedoms to fuel innovative ideas, it’s important to maintain balance across your teams and work towards clear objectives. Without ambidextrous leadership, you risk overspending and focusing your energy in the wrong places. Or worse, prioritising today versus tomorrow.

Organisational Leadership

A critical factor of successful corporate innovation is to set clear objectives that are understood at all levels of your organisation. While ring-fencing your innovation teams from your core business function is a useful step to accelerate processes and embrace a lean approach, it’s vital to maintain open lines of communication with key stakeholders.

Whether it’s sending regular financial updates or sharing exciting updates with your wider organisation, ambidextrous leadership is all about managing resource allocation and validating the value of your work.

A golden example of an ambidextrous leader is the mastermind behind Amazon, Jeff Bezos. In an interview with Bloomberg BusinessWeek, Bezos said the following:

“There is a ton of fine-grained innovation that happens on a daily basis to make our operations more efficient and lower costs.

I’ve made billions of failures at Amazon.com. If you already know it’s going to work, it’s not an experiment. Only through experimentation can you get real invention. The most important inventions come from trial and error with lots of failures.”