The biggest risk is not to take risks
In such ambiguous and uncertain times, to invest on an innovation strategy doesn't mean to take more risks, but rather manage risks
In these times of great volatility, uncertainty and ambiguity, to embrace innovation is not only a matter of finding new growth opportunities, it is also a survival strategy to lower uncertainties by tapping into the unknown with a structured approach. Few times new opportunities are created exclusively from inside an organization. Cases like the Apple's iPhone launch or DELL's made to order approach are really rare. The majority of opportunities come from changes in the external environment — Social, Technological, Economical, Environmental and Political — and in order to succeed it is absolutely essencial to be able to read the signs in advance and get prepared to move first and move fast by exploring several options at different levels of uncertainty, ranging from low uncertainty projects aiming to enhance the core business to, on the other side of the spectrum, high uncertainty projects aiming to explore and discover new ways of creating value for customers and the company. In between there are adjacent innovations that create platforms for new offerings or market expansion. A good innovation portfolio has projects in all four quadrants and companies should move in two directions.
On the top right of the matrix you will find a highly uncertain scenario where new solutions could create a disruption in the market. On this quadrant (disruptive), the main goal is to explore as many options as possible investing the lowest level of resources while the company learns how to deal with that scenario, aiming to bring that new opportunity closer to the business core.
On the bottom left quadrant (core) the major goal is to expand the company's core business to new places where the company can succeed by capitalizing it's internal capabilities. At this quadrant, the company should can invest larger amounts of money on a small set of projects with a proven record of success, allowing the company to sustain a differentiated position on a highly efficient way. From this point the company should try to expand it's core by leveraging existing capabilities to serve new markets or acquire new capabilities that could be used to expand its value proposition for current customers.
Let's see four well known examples, one for each quadrant:
Core Business: TESCO the British retailer has leveraged their existing massive number of stores to become pick-up points for their online sales offering more convenience and agility to customers
New Markets: AMAZON has built a strong knowledge and infrastructure to efficiently run an online business, so strong that allowed them to launch Amazon Web Services (AWS), an on-demand cloud computing platform to individuals, companies and governments, on a paid subscription basis.
New Offers: GE aviation had learned new Internet of Things and Analytics capabilities to completely rethink its business model by charging for air time instead of selling airplane turbines.
Disruptive: Bossard, the Swiss fastener and logistics firm has redefined how companies deal with screws, nuts and washers by creating a full range of smart solutions in inventory management allowing customers to dramatically reduce their total cost of ownership while extracting more value from their relationship.
Disruptive models and incremental innovations are easier to be understood and that's why many companies put their focus on one side or the other, while adjacent innovation is less clear to grasp but also very powerful for those who master them. Amazing opportunities reside on leveraging existing knowledge to serve new customers or learning new capabilities to serve existing customers by widening the company's portfolio of solutions.
What capabilities does your company have today that could be monetized by reaching new markets or what new capabilities can your company learn to extract more value from current customer relationships?
