5 Questions to Build Your Company’s Capacity for Innovation

Innovation is a discipline that can be learned and repeated. However, it is organised and operate differently from everyday business.

Many companies are aware that they need to create an innovation capability but don't know where to start. Working through five ideas can help understand what projects are essential to success, how to get projects into your portfolio, where innovation and growth are located, and how to start work with a few small projects.

Executives are seldom set up to deliver performance and growth. Instead, they typically pay more attention to day-to-day performance.

One way to focus on growth is to ask your organisation to articulate how much new growth they expect to get and where it will be coming from. Then, you need to look at your portfolio of opportunities: the projects and programs you are currently working on. 

• Assign spending to what is needed to keep your business going, 
• decide on what to invest in the next generation of your core, and 
• consider how to explore options for the future.

The governance system in your organisation helps projects into the portfolio. It also establishes the scope of innovations and defines what is in the scope. Ideally, it is the growth board that sets up metrics for what opportunities deserves further development.

• A good practice is for the funds the growth board manages to be separate from the funds that support the base business.
• This fund should bear any losses incurred by a new business.
• The leader may get all the benefits of any upsides and isn't penalised for any downsides.

Use scorecards to allow people to see the logic behind your strategic choices and lay out what good looks like for your strategy.

• In a meeting, have everyone identify two initiatives or ideas they were involved with developing recently (one which was a good strategic fit and the other that they'd have preferred not to be involved in.)
• Identify and document up to five factors that made the difference between the two.
• Identify common themes that emerge.
• Score a few actual projects.

You should now have a set of statements that define what good and bad look like.

There are seven different types of how to locate an innovation group within the company.

1. Put the innovation group inside an existing business unit.
2. Create a division within a current unit specifically for innovations.
3. Add it to R&D.
4. Have innovation report to a dedicated senior staff function in line with the top leadership.
5. Create a whole new ventures division.
6. Have the innovation group report directly to the CEO.
7. Adopt "permissionless" structures.

If you are new to this, use one of the first four. The last three requires a larger organisational change.

At first, do not start with a large team or a significant budget. Instead, pick a few small projects where success can be shown and use them for training people on how to plan uncertain projects with a discovery-driven approach.

• It means planning via checkpoints,
• people learning the approach to testing and learning,
• discovering which assumptions are valid, and
• experimentation.

Progress metrics for innovation is different from the established business. Relevant metrics include progress through checkpoints, the speed of experimentation, interactions with customers, ideas rejected.