Value creation is highly dynamic, it is going on all the time and can increase, decrease or transform, in different ways, when you exploit your different capitals that will be in constant change and adjusting to reflect your organization’s business activities and eventual outputs.

This is when you can begin to see the value created by the use of deploying all the capitals to build new growth and what I call “stock” that along with “flow”.

Robin Sloan does a brilliant job of explaining this. I loved this explanation of the two:

“There are two kinds of quantities in the world. Stock is a static value: money in the bank, or trees in the forest. Flow is a rate of change: fifteen dollars an hour, or three thousand toothpicks a day. Easy – too easy.”

“Flow is ephemeral. Stock sticks around. Stock is capital. Stock is protein. And the real magic trick is to put them both together. To keep the ball bouncing with your flow—to maintain that open channel of communication—while you work on some kick-ass stock in the background. Sacrifice neither. It’s the hybrid strategy.”

Value is not just from within, it is the links our organizations are constantly making with others, in the interactions, relationships and the combining of the activities. The important need is to manage the stocks and flows of the capitals

The role of all the capitals is crucial to understand, they create or destroy value. It is the constant flow between all the capitals deployed that makes up the value creation process.

Our management within our organizations needs to know where this real value creation resides.

Understanding all the makeup of capitals needs to be approached in practical ways.

The place to focus is on recognizing the material components of what is making up the specific value creation aspects that will provide benefits that have been captured, understood, maintained and then enhanced for the additional value creation

Longer-term value creation

Clearly, the ultimate objective is to enhance the organization’s abilities in the longer-term to appreciate the growth strategy. The more we know as outsiders of the value creation process the more likely this will attract greater investment. Often this is determined by the final product, service or business model outcome.

Today we lack the measures to judge longer-term adequately, that this is enough in organizations. We are judging them on their innovation activity going through the immediate pipeline and that judgment often lacks the real makeup of the application of the different capitals, invested in the knowledge that can provide the sustaining growth- today we are far too geared on immediate expectations and those are locked up in the short-term.

It is becoming critical to understand our sources of knowledge, it gives us the unique capital that differentiates one enterprise from another. The intangibles today are up to 80% of the value assigned to the (market value) worth. Managing these intangibles is critical to our future. Yet, we still have a very poor grasp of how to capture these and drive this knowledge capital. That needs to change.

It is the knowledge that feeds innovation

It is the Knowledge and Innovation combined that make the firm competitive. There is a positive correlation between these two. One amplifies the other, one deepens the other in the connected understanding. The basis for this comes from both human and artificial intelligence.

As we learn to capture from both we build our capital base and strengthen our future potential. We make ourselves more sustainable as well as increasingly adaptive.

The greater the stock of knowledge understanding will increase the potential flows of innovation and this “powers” the future value creation.

Greater engagement or not?

We can leave this knowledge building to the management, just sit back as investors or consumers and simply expect increased dividends and new products. We actually need to dig a little deeper and push management to inform us we will not enjoy any of those nasty surprises when the results fail to materialize.

The argument is that the investors, the stakeholders within a business, need to understand the business logic far more, to make a more informed decision to continue to invest or partner with a particular organization. That logic comes partly from the ability to create value

Knowing the successful generation of all the intangible values and their transformation into tangible forms and how this is systematically being harnessed tends to confirm the realization of the business goals or what the possible risks are.

Gaining better visibility for the process of value creation is necessary.

Organizations are certainly fairly reluctant to discuss these except behind closed doors to selected investment parties in their investor’s briefings. Making these more visible leads to greater accountability and to be ‘accountable’ you need to understand the makeup of your capitals.

The present incentive for business organizations to become more vocal in explaining their business models, their process for value creation and offering more insight on all their capitals is their need to grow and that comes from investors wanting to invest and customers wanting to buy something that has a sustaining future!

Explaining value creation is essential, it builds the connections.

taken partly from previous value creation work

The post So what is value creation? first appeared on Building Your Innovation & Ecosystem Intelligence.

I always find it interesting when different though-strands seem to collide. You can put that down to serendipity, fate, luck or just being in the right spot at that time. I have always been a fan of the book “The Medici Effect; breakthrough insights at the intersections of ideas, concepts and culture” by Frans Johansson.

I like to think I am often colliding at the innovation intersections where I keep finding lots of synergies that feed my research and innovative curiosity to support others.

For the past six or so weeks I have been looking into Ecosystems and one of those (famous) strands took me to “Natural Language Understanding” and I read an article by Mark Seall, Head of Digital Communications at Siemens called “How AI is shaping the future of marketing communications” and it got me curious.

Now I am part of Siemen’s SIEx community (link to some published work from the community) that has a group of “savvy” individuals offering outside-in thinking trying to influence and shape different conversations taking place in and about Siemens. In this group are different voices bringing in their expertise and insights. We look to engage in issues and challenges that give value and impact, sometimes it works, other times less so!

So I approached Mark Seall and we had an initial discussion on the use of AI and this natural language tool they have been using. Siemens has a collaboration with Storyroom.ai. Storyroom provides a set of unique datasets and AI to meaningfully connect concepts, ideas or thoughts, to drive awareness and engagement.  Storyroom is a venture-backed AI startup, based in California.

Mark offered me an opportunity to “play with the AI tool” and I initially did some knowledge understanding around the topic of “Digital Factories” which provided an interesting set of keywords and different visuals or possible conversation maps.

I have provided some feedback on this to his team and hopefully, as this tool is in Beta it will give them some helpful points to improve their next round in developing the tool.

What I decided to do was go a whole lot deeper and apply my topic expertise in “Ecosystems”

Now comes the second Serendipity recently. I am a great admirer of the work that Itonics offers around Innovation Management. Recently they have also been exploring AI-Driven Innovation and in a very recent post “Why AI-Driven Innovation Should Be On Your Radar”  they are highlighting a recent Hype Cycle graph for Innovation Management Techniques,2021.

That got my interest up as I show here in this adopted visual of the Hype Cycle for Innovation Management

It seems the current peak of expectation and the emerging innovation trigger are in my present research focus. Now that I liked!

According to Gartner, “AI-driven innovation refers to the use of artificial intelligence technologies in the process of innovation.”

” AI-driven innovation is positioned on the rise of an innovation trigger, Gartner believes, AI-driven innovation is considered to hold potentially transformative means to “drive high-impact innovation at scale through the discovery of new ideas and rapid progress through the innovation pipeline”.

Gartner says, “this suggests that the innovation management technique will enable new ways of doing business across industries, resulting in significant shifts in industry dynamics.”.  “AI-driven innovation could either be in the form of new inventions like new drugs or material discovery in specific domains or could be used to boost agility and efficiency in an end-to-end innovation process pipeline across use cases and industries.”  

Back to the AI tool and my “Ecosystem” work 

So my work, at the beginning of applying AI has been to interrogate this tool on the following aspects of “Ecosystems”. I generated different results for:

• Ecosystems
• Innovation Ecosystems
• Business Ecosystems
• Sustaining Ecosystems, and recently back to
• Ecosystem Management.

Initial output for “Ecosystems”

I found the general use of “Ecosystems” narrowing down the searches to more Ecosystem-related or orientated to Business are still providing interesting triggers like “Novel Ecosystems”, “Ecosystem Models”, “Ecosystem Service”, “Ecosystem Thinking” and “Ecosystem Design”

In my early rounds, I decided in taking out “Sustainability”, “Circular Economy”, “Life-Cycle Assessment,” to gain a better amplification of the points above. These different searches have given some good food for thought on future approaches to “Ecosystems” Both outputs or rounds offer different approaches to Ecosystems.

Then investigating the Outputs for “Innovation Ecosystems”

As for “Innovation Ecosystems” that yielded a veritable host of strands of associated thinking. These included “Value Networks”, “Transferring Knowledge”, “Diffusions of Innovation”, “Network Design and Theory”, “Co-creation, “Platform Design”, “Competitive Positioning,” “Dynamics of Innovation” and “Innovation Impact” among some others that have taken my thinking in new directions. More on those in the weeks ahead.

Then I found comparing “Innovation Ecosystems” with “Business Ecosystems” really separated the two in some unique ways.

What I did find was that much as “Innovation Ecosystems” was certainly a rich data set, the “Business Ecosystems” one was much richer. I will discuss this in a further post over at my Ecosystems4innovating posting site in the coming days.

A time to absorb and reflect on what I am learning here

I am still absorbing each search and revision, so as to understand changes and potential value points for part of my Ecosystem work ahead.

I have found applying this “natural language generation” technique as helpful, it has accelerated and streamlined my research, making any analysis faster, it has been sometimes puzzling but I feel you are gaining from “real-time” data and keyword associations that provide new insights. The end results will certainly help shape my thinking into the future of Ecosystem Management.

AI can enhance value and provide signals to emergent trends

I do think Siemens, in pioneering this technique, does give them a very interesting edge in the marketing communication area, which they have been applying this tool to.

There are many future possibilities they can explore and it is giving me a whole different level of understanding of Ecosystems and what has a positioning, value. It is giving me greater confidence in what makes up the different Ecosystems I have so far investigated, and applied this tool.

In the work, so far, I have undertaken I have found growing insights and triggers. Applying this learning and converting this into “future understanding” is my next step.

The next steps get interesting………..

In my second post on AI-driven innovation, I looked closer at the differences for building an Innovation Ecosystem against focusing on a Business Ecosystem. One seems on the first investigation “richer” than the other. The link to the post is here

The post Innovation Ecosystem Understanding through an AI-driven approach first appeared on Building Your Innovation & Ecosystem Intelligence.

The critical interplay among innovation, business models and change

Jeffrey Phillips and I have collaborated over a number of years and I have always felt these have been highly productive, original in thinking and truly valuable.

One such collaboration was around the interplay of innovation with business models and change.

I wanted to extract part of this white paper”Critical Interplay Innovation Business Models Change 6-2“(goes to PDF), in this post, as it offers all involved in innovation a structure to break down innovation into its different models of application. It describes some important observations we often forget when innovating.

The dynamics of innovation and change

As we described above, many corporations haven’t carefully defined the scope of innovation activities and don’t recognize the impact of innovation and its incumbent requirement for change.  We’ve defined the three constituents that are impacted by change:  customers, competitors or market, and the innovator itself.  Let’s now describe three tiers or scope of impact an innovation can create:

• Incremental: Making changes to existing products and services with little change to an industry or market. Customers may need to change to some degree to adopt or adapt to a new product.  Competitors and markets will ignore or quickly match the new capabilities or features.
• Breakthrough: Making changes to the existing industry or business model. A company may discover innovations that impact the industry’s operations, structure or business model, in effect forcing change on its customers, its industry and by extension, itself.   A breakthrough innovation extends or changes an existing technology, capability or market in such a way that customers and competitors must change to some degree.
• Disruptive: Innovating to create a new market or industry, or innovating in an existing adjacent industry. An innovator may identify or discover needs that allow it to create a completely new market, segment or industry, or enter an existing market, segment or industry and change it or disrupt the adjacent market.  Disruptive innovation requires change on the part of the customer and creates such drastic change that competitors are forced to change or remove themselves from the market.

What’s important to understand is that every innovation creates change, and the amount and impact of change that occurs is different across these three distinct types of innovation.

Applying the three horizon framework to innovation and change

To explain the impacts of innovation and the change it creates, we’ll use an accepted framework (the Three Horizons) to consider the impact innovation has on change capabilities and business models.  Here we introduce the three horizon concept to better understand the range of innovation outcomes and the potential change requirements.

The three horizons framework provides distinct horizons, requiring different outcomes and approaching the scope of innovation in mindsets. Usually, it is represented by a typical XY plane, whereas Y is the amount of scope/need/value/change over x, the time each takes/seen/needed

What’s important to understand is that every innovation creates change, and the amount and impact of change scales out across each of these three horizons.  For greater clarity, let’s examine each of the three horizons in a bit more detail.

Defining Horizon One – Operating in the Now

Horizon One defines the portion of the potential innovation space that is most similar to existing services or solutions.  The typical innovation focus in Horizon One is on improving efficiency or cutting costs.

Innovators working within this space are typically creating small but useful changes to existing products and services, offering new solutions to existing customers and prospects.  The anticipated outcome is “incremental” change, easily adopted by existing customers and no real threat to the market, competitors or the industry.  This innovation is based on existing capabilities with the intent of maintaining or growing existing shares in the existing markets.  It relies on existing capabilities and emphasizes excellent operational execution, with less focus on new needs or expanding the competitive market space.

The internal change focus is on improving execution and increasing efficiency.  There’s little change required for external constituents.  Consumers are already familiar with the products and have some expectation of improvements or modifications.  Competitors and the industry at large aren’t significantly impacted by the innovation.

The vast majority of innovation activity is “incremental” innovation because the risks are low, and market knowledge is relatively high. 

Defining Horizon Two – Looking ahead, anticipating change

Horizon Two is the portion of the potential innovation space that focuses on extending existing capabilities into new markets or introducing new capabilities into existing markets.  Horizon Two is the mid-point between “incremental’ change in Horizon One and “disruptive” change in Horizon Three.

Companies innovating with this horizon anticipate “breakthrough” innovation, usually extending a known technology into a new market, or introducing new technologies or capabilities into the existing marketplace.  Breakthrough innovation often requires extending to new capabilities as well as building on existing capabilities, with the intent of expanding markets and the competitive space.

The innovation arising from the 2^nd horizon requires more experimenting than Horizon One innovation and often leads to some change for all three constituents.  Internal change in this horizon is focused on experimenting and extending capabilities. Consumers may experience change due to the introduction of new technologies or capabilities.  Competitors will experience change due to the broadening of industry definitions or modifications to industry or technology conventions.

Operating in Horizon Two the innovator begins to stretch its horizons, using either new technologies, extending or establishing new practices or capabilities as they explore and enter new markets or shape existing ones differently.

Defining Horizon Three- The future, defining change and transforming

Horizon three is the portion of the potential innovation space that seeks the most significant innovation change as the innovator seeks to create new markets or dramatically change or disrupt existing markets, or create completely new technologies or capabilities. 

When companies conduct “disruptive” innovation the anticipated result is market or technology disruption, creating new market dominance by upending existing products, technologies, capabilities or markets or creating entirely new products or markets.  Innovating in Horizon Three requires significant discovery and learning while building and adapting new capabilities.  Successful innovation will create disruption for all three constituents.  This is the space where the most change will occur.

Consumers will find a completely new, novel and valuable solution to an existing problem or challenge, and must change their actions or behaviour to adopt it.  Disruption of industry expectations and norms will force competitors to react and may cause so much change that they cannot respond to the speed and scope of the change.

The innovator themselves must change, in order to provide all of the features and capabilities the disruptive innovation requires in order to be adopted by consumers.  These internal changes will be based on exploring new technologies, evolving business models and expanding the definition of the market or solution.

Those attempting Horizon Three innovation are creating entirely new capabilities or technologies, creating new segments or markets, or both

Relating innovation and change within the three horizons

As we define each of the three horizons and the anticipated innovation outcome, we can begin to document the differences among the potential outcomes, in terms of approach, the leverage of new or existing capabilities, intent and strategy, and many other factors.

Understanding the decision making, strategy, intent and emphasis required for each horizon helps delineate the commitment, resources and effort involved, and begins to signal the scope and impact of potential innovation and the change the innovation can create, for customers, markets and the innovator.

These ideas culminate in a rather interesting conclusion, which is that any innovation, especially in horizon two or horizon three, regardless of its intended outcome (product, service, channel or business model) is also by definition a need to reflect on a business model innovation change.

Will the innovation significantly change the existing business model or distort or disrupt the model?  This means that innovators internal to the industry will be constantly evolving the model from within, questioning it, evaluating changes, and new entrants and disrupters will seek to change and challenge existing models from their external perspective.

Both of these facts lead us to the conclusion that good innovators must excel at sustained change and business model evaluation.

Most corporations don’t understand how much change is created by innovation. 

This naïve assumption is dangerous and almost always wrong. 

Innovation in almost any form may require that the customer or market change.  It’s very likely that these innovations will require that the innovator change as well. We simply cannot expect to create change in the marketplace or in the customer base without also being expected to change as innovators.

**Taken from the white paper Critical Interplay Innovation Business Models Change 6-2

The post The critical interplay among innovation, business models and change first appeared on Building Your Innovation & Ecosystem Intelligence.

Now I am a terrific admirer of Steve and his thinking but he does, I feel, rush to an assumption to fit one specific problem area, most coming from the start-up world. I apply the three horizons from the more mature organizations perspective and in a much wider lens framing approach than clear he does.

Steve Blank, no less, wrote about the problems with applying the three horizons as his view recently. You can read it here. He changed the title from “the fatal flaw of the three horizon model” to “fast time in three horizon high” mainly due to the push back he received from one of the original creators of this framework. It got even further dampened down into a more observational under “McKinsey’s Three horizons Model defined Innovation for years. Here is Why It No Longer Applies” in a Harvard Business Review posting that digs him further into his specific business focus corner that little bit deeper, as his title assumes.

Steve, I have news for you, the three horizons frame is healthy and fit for use, maybe not in your specific application (although I know it can be) but in multiple applications. I am not sure he decided why he became so dismissive on the 3H. “Fatal flaw, fit for use” can confuse a wider audience, many living off his pronouncements, when the value of this 3H frame is even more compelling today than when it was first proposed. It has moved on, not regressed.

Actually, he is wrong again on that initial innovation positioning for the 3H. It was proposed by McKinsey for a growth strategy framework and then others then took its framing principles and applied them differently. The 3H can lend itself to innovation application in multiple ways really well. Not sure the changes in titles conveys his message better than his provocative one of “fatal flaw”, which has been challenged already, with due “diffidence”. The “fatal flaw” might be in his rigid application and not in the many ways you can apply the Three Horizons potential across a broad range of framing techniques.

Steve is absolutely right, speed has made such a difference for every organization to quicken their pace. Each of the horizons has for some come closer together, or as I recommend, need all working in parallel, not one following the other

Actually, I value the three horizons in analyzing a business, its position today and its stated position tomorrow and look for gaps or opportunities to work on the different horizons needs of supporting the present, building capabilities in the near term and exploring the future in imaginative ways. One of the outcomes is more than likely, in most cases, mean adding new competencies, capabilities, and capacity.

Also, the three horizons is a good dialoguing frame to allow each of the voices within an organization to have their opinion “aired” and then the combined voices determine the path forward. I’ve written on that here in a post “Drawing out the different voices within the three horizon methodology for Innovation” and here. “Are you engaging with all the different voices around you?

I also offered up a different perspective on using the Three Horizons as a Wire Frame” Applying the Three Horizon Thinking to a Fresh Perspective of Innovation Design”

Then I looked at how to manage our assets “The New Game Or Is It? Asset Orchestration” talking about modes of commitment to innovation as first suggested by Javier Busquets.

I can go on and on about the potential versatility of the three horizons, just put into search on this posting site “three horizons” you can view the different articles I’ve published on this, or equally you can download these within different summary series, within my “insights and thinking” page, under the three horizons. They do offer a detailed build on this framework to bring it all together.

Then to finish here in my push back to Steve and his (restricted) view of the three horizons, in one of my posts “The Compelling Value of the 3H for Innovation Management“

He can perhaps open up his thinking a little more on the 3H and its value?

I still think he fails to see this beyond his “relative delivery time” applied to each horizon. He is absolutely right that horizon three deliverables have sped up but I still believe he thinks outside big organizations (thankfully to get alternative thinking) and inside these, the three horizon framework is a great (initial) organizer, to break down the complexity of thinking, if you apply it with some different imaginative thinking.

It gives a portfolio thinking for setting different priories, revealing needs, and expertise to give the renewed intensity of purpose towards each horizon. It breaks down complexity and gives the actually greater intensity of purpose.

The three horizons can be in need updating from its original purpose but if you apply one definition you can miss the real power of its value, I see multiple applications.

I think Steve does a good job of challenging some of the shifts we are undergoing in thinking differently.

Sometimes he does like to sensationalize this but that is partly why he stands out in challenging much. He makes us sit up and listen. His lens, coming from the startup environment challenges many existing ones of the incumbent.  I am always really pleased to see it through his highly “entrepreneurial eyes”.

Today if you apply the three horizons as originally intended it certainly does not solve his basic argument of a speed of deployment and asymmetry but it gets the conversation framed in larger organizations in many imaginative ways if you are prepared to step outside the three horizons original constructs thinking.

Applying the three horizons to breaking down complexity in how we organize and manage and why it needs to be seen in different frames does not go away. It does a great initial job of recognition and allocation, to tackle different challenges of managing change in different ways.

Perhaps Steve is applying his own thinking too rigidly to the three horizons, he might want to open it up in its rich potential of the application. Sometimes leaders might miss the memo as he suggests but also those writing the memo miss important points to restrict and not open us up to alternatives.

Yet as we see business as ones framed in threats, disruption concerns, ways to deploy resources, allow a focus on where to place “thin” resources, apply different techniques for prototyping, minimum viable products, tackling legacy etc there is an amazing richness within this three horizon framework. They are under appreciated.

One day I want to find the opportunity to dig around the greater value than looking through his prism of the “start-up is eating the established business world”. He is totally right that incumbents are facing more challenges from new competitors that make the incumbents business model quicker to becoming obsolete.

If you apply time to the three horizons model you do get what he states but if you take the assigned horizon work and apply the principles of simultaneous working them, you get a level of clarity that most new entrants can never comprehend, as they often do not have the level of insights that the incumbent does.

We need to apply the concept of the three horizons in greater ways for the incumbent, not just as he suggests, through one lens that he seems constrained in this limited application.

The post How do you apply the three horizon framework in your thinking? Steve Blank you are limiting your thinking. first appeared on Building Your Innovation & Ecosystem Intelligence.

They might be operating at the two ends of the current internet trading spectrum and are coming from different market maturity positions but it is the asset management that is becoming critical for delivering the profit or dragging performance.

Now Amazon is far from “asset heavy” when you compare them to the Industrial companies like GE but asset orchestration is seemingly getting far greater management time for all companies it seems. The lighter you are, the more likely you are to be more flexible and adaptive to respond to more disruptive challenges being faced by industries that are undergoing the shift to being more “digitally enabled”. Alibaba is very much a good asset orchestrator.

I wrote a post some time back called “Asset Orchestration is required for more Dynamic Innovation” and offered a thought (or two) such as “you must orchestrate the capabilities, to purposefully build what is needed to deliver the final result”. At the time I had been reading some work undertaken to frame this asset orchestration by Sirmon et al during 2007 and 2008 that focused on the different actions of the manager, or asset orchestrator.

In this research they (Sirmon et al) suggest there are three primary stages of structuring, bundling and leveraging resources for the purpose of creating new value for customers and gaining competitive advantages, however temporary in today’s world. It is why this needs to be dynamic, ever evolving, to keep orchestrating your assets continually and it was not until recently I made a further set of connections into asset orchestration. Let me repeat these as they are increasingly important in the world of platforms and ecosystems.

Let me repeat these as they are increasingly important in the world of platforms and ecosystems.

The three primary stages of asset orchestration can be broken down:

• Structuring involves acquiring, accumulating and divesting resources to form the organization’s resource portfolio.

• Bundling of integrating resources to form capabilities, that can stabilize or provide incremental improvements to existing capabilities, or that enrich and extend existing current capabilities and thirdly, pioneer, which creates new capabilities.

• Leveraging involves a sequence of processes to exploit the organization’s capabilities to take advantage of specific market opportunities. This includes mobilizing, offering a clear plan or vision of needed capabilities, coordinating for ways to integrate these necessary capabilities and finally, deploying to achieve a resource advantage (or gain) that promotes market opportunities and instills more entrepreneurial strategies to exploit new resource configurations

A new moment of recognition for me was tucked away in my past research

The catalyst to this recent light bulb moment (well for me) was a thesis written by Javier Busquets, while at the Copenhagen Business School. His paper was “Orchestrating Network Behavior for Innovation“, written in 2010 but becoming increasing relevant to today’s world of managing assets more lightly.

We are seeing a change taking place around the building of networks and the way organizations are forming coalitions through ecosystems and platforms and in combining new technologies and blending business fields. Again I think Alibaba is doing a really good job of that. They are deliberate orchestrators. They are agenda setting, mobilizing, consolidating and coordinating different points of emerging value.

Within the thesis of Javier Busquets, he evaluates much of the published literature that ties up with dynamic capabilities, the network effect and capacity building and the constant way these orchestrators keep extracting more value from the network, that continues to expand.

I have been building my own understanding of these in (yet another) dedicated posting site for building Innovation Fitness Landscape Capabilities into Organizations.  Orchestrators seemingly are keeping pushing the boundaries and moving their relationships into this constant dynamic evolution. Arguable orchestrating, as seen this way, sets a new innovation path we all need to understand and I keep pursuing.

I particularly valued Javier’s Chapter 3: “Orchestrating Network Behaviour for Innovation” as it connected again a part of separating out in the ecosystem and platform work Jeffrey Phillips and I are undertaking, the differences between old economies and new is increasingly coming up.

One highly relevant observation

One comment he made was “orchestrating is a function of (1) changing the rules of the game to keep the game alive and (2) avoiding disruptions, thus ensuring continuity through the connection between the old and the new, or between past behavior patterns and the present and future ones.”  It is balancing the difference forces coming into play increasingly in a world of ecosystems and platforms of leveraging external resources and keeping them highly dynamic.

Shaping new boundaries

So is asset orchestration becoming increasingly critical in the age of ecosystems, platforms and managing technology and data? As we build our understanding of the power of this connectivity we are constantly changing the rules. As Javier Busquet suggests, it is about “shaping new boundaries“, ones of opening up new space, opportunities and sources of innovation, to build new platforms for discovery and collaboration potential and build new, differentiating capabilities to innovate.

Combining views- the three horizons and modes of commitment to innovation

One visual got me excited. It just fitted with my extended view of how the three horizons can be taken out and extended further. In adapting his original diagram I have added this 3H view.

It takes the 3H framework into the very need of today, developing the thinking of each of the three horizons to work towards our transformation from the solo organization offering (disconnected) products and services into ones that connect technology by platform participation and ecosystem exploration for greater innovation. Here is my adapted visual and opens up my thinking even further.

In summary

So I do feel asset orchestration is rapidly becoming a critical management need to manage effectively. It is recognizing its potential in managing the asset dynamics to deliver innovation that stays ahead of the curve as we expand out and collaborate on a range of platforms and ecosystem engagements to navigate towards a different future.

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The post The New Game Or Is It? Asset Orchestration first appeared on Building Your Innovation & Ecosystem Intelligence.

How do you sustain innovation, is it more through the structuring of everyday work, by creating a particular set of social rules and resources that foster specific routines? Or something different?

We work really hard at maintaining these re-occurring processes, never willing to extend and push them in different and new ways. We have actually become very static in our approaches and learning, we are not learning anew.

We often simply end up with incremental innovation that might just ‘nudge’ the growth needle but does little more than sustain us in the present and can be ‘contained’ in a tidy process that makes many, including the ‘bean counters,’ very happy until someone changes the game.

Then we need to think differently but this is usually far too late.. As demand is more volatile today we need to experiment, explore, learn and adjust. What becomes more important is the ‘work to be done, and how we go about tackling this and not the work done where we often simply ‘default too. Surprisingly Adam Smith identified this important difference in work way back in 1776.
This can be explained as the ‘work done’ is the accumulated knowledge, which has built up and been embodied in the firms results with the innovations achieved in the past and is seen as the tangible capital that we continue to leverage..

The work to be done is how well it can adapt to change or what needs to be brought in to help in this new work. In the past century we operated in mass production era, with systems with standard goods and stable market conditions the ‘work done’ was equivalent to the ‘work to be done’.

In today’s global market, with its rapid technology diffusion, disruptive and constant change, with an emphasis on serving the ‘work to be done’ as more important than the ‘work done’ and identifying and growing our intangible assets are fundamental to this. This is where we need a more radical, evolving innovation set of capabilities to push our business growth beyond the normal.

Work to be done is the need for our future growth and well-being to be derived through innovation activities. These are so much made up of intangible parts, the growing innovation capital, that will provide the new wealth of organizations in the knowledge sharing economy of today and the near future.

Certainly I buy the argument that Innovation should become part of everyone’s job on a daily basis so they have the space and potential to work on it constantly but what does this require? This is part of our journey within seeking innovation fitness through its dynamics.

Part of our innovation debate is what is “dynamic” or “routine” for managing future innovation success?

For me the argument points to the capacity to build “dynamic capabilities for innovation” around the critical situation we are all finding ourselves in, that we are all in an age of rapid ongoing change.

‘Rapid change’ calls for constantly developing and leveraging new understanding, building knowledge that is based on dynamic capabilities, it evolves and changes all the time. These need to be fully understood so the appropriate resource and commitment can be placed behind them.

The world of innovation is based on something that is very clear: it is consistently changing and challenging, has never-ending competition, a constant price/performance rivalry, increasing quest for improving returns and the ‘creative destruction’ of existing competencies all certainly contribute to rapid change no doubt.

This is a highly dynamic environment we are all living and operating in today. Are you building those skills and capabilities to adapt and react?

Building new capabilities or stuck in the past?

Are our organizations building the capabilities to become highly dynamic or are they stuck in the past, looking for routine and repeating established procedures expecting these to get them through this volatile world? They will find this path of repeating established practices like the one to their own demise and eventual destruction.

What are the firm-specific capabilities that can be sources of real evolving but equally lasting advantage? How can combinations of competencies and resources be developed, deployed, nurtured and protected? These need to be difficult-to-imitate combinations and integrative enough to give new sources of competitive advantage to stimulate new growth and financial return.

In my work, I have spent considerable time investigating what makes up the dynamics that accelerate our abilities to innovate in better ways, so it sustains and equally evolves to ‘battle’ the increasing volatility we will be facing on an ongoing basis. These

Strategic innovation often changes the ‘game’; what it explores and exploits to stay dynamic.

Firstly we need to go back and understand “What are dynamic capabilities?

Dynamic capabilities are those skills, processes, routines, organizational structures and disciplines to build, employ and orchestrate intangible assets that are not replicated easily by others and constantly change to meet customers’ needs.

Dynamic Innovation Capabilities need to advance knowledge creation and absorption, extend and integrate what is learnt into something more worthwhile, something new. These capabilities need to learn how to modify constantly the way we operate, reconfigure and redeploy.

This involves the dynamic of sensing, seizing and transforming (Teece et.all) at the three interdependent levels of the individual, firm and network to coordinate/ integrate, learn and transform constantly and to reflect the constant change that is taking place.

Two different academic views but does one lead to the other?

Dynamic Capabilities are defined by Teece, Pisano & Shuen in their different papers on the subject as “the firm’s ability to integrate, build and reconfigure internal and external competencies to address rapidly changing environments so as to achieve new and innovative forms of competitive advantage”.

Everyday Dynamics are where people know what is expected of them and what to expect from others and have a common ground for negotiating collective action in particular situations that create an ongoing social fabric where innovation naturally flows. Zollo & Winter suggest a dynamic capability “is a learned and stable pattern of collective activity through which the organization systematically generates and modifies its operating routines in pursuit of improved effectiveness”

Both definitions require learning through equally exploiting and exploring
Both of these ‘dynamics’ arise from learning and this within organizations more likely to come from systematic methods.  Innovation nearly always requires structure, process and being worked through in systematic ways unless you perhaps are a sole inventor/ innovator.

To work with others successfully you need a certain structure, a process and a given environment and culture to deliver innovation.

We have to realize that capabilities for innovation are complex, they are structured and multi-dimensional.

Often today organizations strive to keep these far too much in “equilibrium” (zero level) but the reality is that our markets being served are not in this ‘equilibrium’ and are constantly being disruptive, more ‘dynamic’ than ever. We cannot keep a ‘business as usual’ mindset we need to recognize we are operating in a potential set of constantly unstable circumstances. Business is a complex adaptive affair.

We need to become far more aware of the dynamics that surround us that are needed for innovation to work constantly. We need our journey to evolve.

The post Building the new dynamics into our capacity to innovate first appeared on Building Your Innovation & Ecosystem Intelligence.

Many innovators are simply happily working away with no specific guidelines, apart from the general remit of “we need to be more innovative”, it lies in the boardroom that is not communicating the board’s needs clearly enough down the organization.

Building up our capacity to innovate does need to understand and reflect the organization’s business activities, as innovators need to grasp the value creation aspects that will deliver the necessary capital-efficient and profitable growth, and then ‘go in pursuit’ to achieve their contribution to these goals.

Even the basic questions often remain unclear, those of how are we looking to grow revenue, save costs, reduce working capital or improve our fixed capital? Managing our innovation activities can help in all of these. Actually if you ask I expect the CFO would say “all of them” but each does have implications on understanding of the fit and eventual role of innovation’s contribution.

Then where equally does risk fit into the strategic equation for innovation?

Innovators often lack the clarity or governance guidelines to know if they can or can’t ‘push’ for groundbreaking innovation.

Risk is kept vague so we can often avoid the unknowns associated with any really different innovation, it becomes ‘the art of avoidance’ by the person who wants innovation but not the risks associated with it.

Innovation is not the usual

Recently in a PA Consulting report called “Innovation as Unusual” they were suggesting the innovation spend just in the UK alone, is flushing some £65 billion down the drain each year, as nearly half the organizations waste good ideas, are far to risk averse and fail to invest boldly around more ground-breaking ideas.

So we are still seeing the majority of organizations are struggling with innovation and in the process they are losing out financially, forgoing huge opportunities in not achieving future competitive positions or foregoing the chances to radically alter their market position. It seems innovation remains incoherent within many organizations still.

PA Consulting in this report were suggesting there are five innovation killers – fear, lack of focus, innovation engine failure, the wrong ROI and finally, a real reluctance to invest. Pretty bad I think?

In one of the outcomes of the report it asks “can we continue to allow 47% of senior executives to describe their innovation activity as a ‘costly failure’?”
Some things need to radically change and having ‘coherence in the innovation activity needs to be central to this needed change. So where do we start?

Maybe we should all start visualizing first.

Recently XPLANE, visualization thinkers who apply a design thinkers approach, produced two brilliant visualizations on the organization, one as the Cost of Confusion and the other as the Value of Clarity. (direct pdf links)
Xplane quite rightly suggests that a picture is worth a thousand words, well for me, these two visualizations I would regard are worth millions to any organization wanting to understanding why their strategy and innovation efforts go wrong and how to begin to put them right.

I would suggest you download them and circulate these around your organization, starting with all your board members and then you really can begin to enter that necessary set of discussions about coherence or a lack of it.

Leveraging the power of the three horizon methodology for innovation

I greatly favor the three horizon methodology to work through for achieving this coherence in understanding. The three horizons offer an excellent framing technique to bring this ‘coherence’ that we need from our ‘here and know’ activities and future innovation efforts. This coherence leads onto knowing what innovation capabilities are needed, what are missing and those really critical ones required to defend the core more effectively alongside (yet separately) needed to expand the potential in the future.

Dedicating time to knowing your innovation capability fitness

I have been constantly working away at what constitutes the dynamic capabilities for innovation and those, shall we say as more static and simply repetitive. It is identifying the difference, and then knowing how to apply these that are dynamic and highly valuable to obtain, against those that simply require a little dampening down.

We then ‘map’ these to the innovation needed to build a growing innovation capability set. This work has a dedicated website for the building up of the case for focusing on this under www.innovationfitnessdynamics.com.

Knowing what are the critical factors for innovation and their dependence for sustaining innovation success is becoming such a vital necessity to understand so an organization can place the appropriate resources behind them.

The question is, which are critical, which naturally occur when others begin to be put into place, which seems to have limited or no real effect on changing the dynamics of innovation?

Deciding that capabilities can be better leveraged requires a separation of exploit and explore.

The aligning of strategic direction (and importance) with any capability needs is in the understanding of what activities are diverging with the core and those converging.

Then we need to figure out the future core and start moving towards it. It is the two dynamics of exploitation and exploration we should be leveraging for our innovation and future growth.

Today we need to exploit and explore and our capabilities need to be built fit for one of these two purposes. Exploiting is today’s business need, to leverage and improve on the existing business and equally, in parallel, explore for tomorrow’s new business growth.

The need to diverge and converge

The diverging ones need to have a real emphasis on improving performance, how they are managed for cash or to eventually sell or dispose of. Then we have those that are converging onto the new ‘known’ core of the business to grow and expand.

So by recognizing these, and that is not easy in itself, you are beginning to know and identify the capabilities you need to have in place to fix today so as to make it as healthy as possible, alongside those new capabilities that will create a new winning set of growth and value propositions that give the ‘promise’ of what can come by applying different mindsets, resources and thinking.

We certainly need bolder investments in knowledge around the make-up of innovation capabilities

I certainly believe there is a real call for fresh and bolder investments in knowledge, in infrastructure that focus on activities that spur new approaches that lead to innovation. These are not just the traditional ones based on managing today’s core.

It is finding those innovations that provide new value, the new generation activity that is occurring from recognizing how we can build, yes build for further exploitation (extending the life) and exploration (new understanding) and manage each as separate risk evaluation exercises with different metrics of progress.

We also need a deeper innovation grounding of internal workings and alignment

What I feel we need is a deeper grounding in what is actually going on inside organizations within their innovation activities and how these align to the needs of strategy and what is clearly missing. We start here as it gives us all this clarity and coherence, missing in much of our existing understanding.

We have the real opportunity today, in finding new ways in combining the four emerging forces of knowledge, technology, entrepreneurship and innovation, which will drive the growth models of tomorrow. It is these that are forming the new innovations ‘black box.’

It is mastering this new ‘black box’ of actual innovation activities, exploring and exploiting the necessary innovation capabilities that are required to be ‘going on’ in organizations to achieve a closer coherence, one that can radically improve the innovation performance.

I have plenty of ideas, frames and methods built up to help you make innovation fit and be more coherent in its contribution.

The post Achieving Innovations Capability Coherence first appeared on Building Your Innovation & Ecosystem Intelligence.

Option pathways are those viable alternatives available when you are suddenly confronted with the need to change.

By being proactive, anticipating and structuring the options ahead you can be more prepared for disruption, you can respond with more thoughtful reactions. Have you ever considered option pathways?

Having available options so you can react to sudden changes, as more sketched out scenario’s that are representing possible variables, the better prepared you might be to respond thoughtfully.

Preparation for blunting or neutralizing possible attacks, vulnerabilities and changing business conditions is more than helpful, because you have made some investments in different possible options and far more ready to respond in thoughtful ways and not simply in those knee-jerk reactions, simply needing to respond.

Considered response, with significant parts already thought through, can safe significantly on ill-considered ones.
Also, it is valuable to begin to prepare and cost out different decisions ahead to be ready, have these fleshed out, then discussed across the people involved in those disruptive force decisions so you are ahead in your thinking on how to respond.

One recommendation suggested by Haydn Shaughnessy a proponent of this thinking (link to White Paper ) is having these option pathways walked fully through with the CFO, so it gives him the understanding well before hard decisions are being made, when you are in the middle of handling the dynamics of disruption.

This seems to help work out option pathways well within my mind, of their value in our needs to be far more prepared for our disrupting moments, bearing in mind these are occurring more frequently.
What more can I learn or even add to this?
I decided to widen the idea out a little and came across some (nearly buried) academic papers, but thanks to Google they came alive for me. These identified Adaptive Pathways and they fit within a policy approach.
The two papers that ‘worked for me’ in what I was looking for were mainly dealing in the environmental change dynamics where you had to have a lot more adaptive thinking within the planning process that describe different types of actions (for example mitigating and hedging actions).

The view here is as we anticipate and determine, we experience and learn, as the future unfolds.
The more we are open to this the more we can become responsive to disruption. The more we talk and describe “uncertainty” where we can paint different visions, or by using Haydn’s “decision model canvas” to promote learning and awareness, so we have ‘options’ in place when situations change, or even when you feel the conditions are right for you to prompt that disruption yourselves.

Let me offer a couple of visual here from the two papers (details shown below)

And the more dynamic thinking

I think these are useful as thinking through the sequence, with some adjustments to account for a business environment and its planning and future casting needs. I felt these two frameworks help me add even more to Haydn’s option pathway thinking.

Mapping the terrain of options of where you would like to be.
You need to develop a preferred road map of where you want your innovation to take you but you certainly need to have developed your options, as no pathway is straight and uncomplicated. By fleshing out your ‘terrain of different realities,’ you are able to describe much of the work, design, thinking and preferences that give you an enduring strategy.

You are formulating a fluid plan that sets out detailed reasoning of how you can disrupt others or react to disruption from others, simply by the amount of organizing principle and details you build into these option pathways. Identifying these potential future forces shape your choices and ‘informs’ your innovation activities you need to develop and provides the scoping possibilities to be far more ready to respond to these forces of disruption.

The crafting of your possible options
Any option pathway needs crafting, it certainly needs fleshing out, it can help inform yourselves and others around you about different alternatives and actions.

Thinking through disruption is not just very healthy to do but essential, in order to survive and prosper. We need to look towards the future and be as ready as we can, in anticipating its disrupting forces that are constantly bearing down on us.
Sources:

• Download Haydn Shaughnessy’s White Paper written for Hype entitled “How companies address the disruption challenge”. This was the triggering point for me to go off and explore option pathways.
  

• Academic papers both from Utrecht University, Department of Geosciences, Twente University, Department of Water Engineering & Management
• Designing Adaptive Policy Pathways for Sustainable Water Management under Uncertainty: Lessons Learned from Two Cases Marjolijn Haasnoot, Jan H. Kwakkel, Warren E. Walker
• Dynamic Adaptive Policy Pathways: A method for crafting robust decisions for a deeply uncertain world . Marjolijn Haasnoot, Jan H. Kwakkel, Warren E. Walker and Judith ter Maat.

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Publishing note:  This blog post was originally written on behalf of Hype and with their permission I have republished it on my own site with some small adjustments. I recommend you should visit the Hype blog site where they have a range of contributors writing about a wide-ranging mix of ideas and thoughts around innovation, its well worth the visit.

The post Anticipating disruption by preparing adaptive pathways to respond first appeared on Building Your Innovation & Ecosystem Intelligence.

Following on from my suggested Common Language approach to the Three Horizons, I would like to outline here its significant value, within any innovation management thinking.

Clarifying our options requires multiple thinking horizons – seeing beyond for all possibilities by listening to the different voices

For me, the three horizons have great value to bring together and  map all the different thinking and possible innovation options over changing horizons.

You can frame innovation in alternative ways by using this approach. Innovation has multiple evolution points and working with this framework allows you to significantly improve all of your innovation contributions.

It goes well beyond the present value of ‘just’ fitting your existing innovation portfolio and directional management into a typical one-dimensional view of just working in the present.

By separating your thinking, appreciating that different voices are competing for attention provides a higher diversity of opinion, different perspectives for improving innovation’s eventual value. Those different voices involved can be highly engaged, all wanting to add their perspective:

• You have the voice of today operating in horizon one exploiting the core, the incumbent business. The manager(s) responsible are protecting, leveraging and delivering today’s result, very much focused on the operational and result orientated issues. Fully concerned with managing the existing business, maximizing returns and keeping the organization going efficiently and effectively, delivering on the needs of the short-term.

• Then you have the second voice, the voice of the entrepreneur, those more pushing into horizon two, the ones eager to experiment, to try out new things. They are wanting to push further, to explore and extend, accepting some aspects will not work but keen to investigate, search, experiment and learn from these discoveries. They are experimenting with the current business model but also wanting to push the boundaries to explore alternatives that might have a disruptive or radical aspect where they can begin to equip themselves to understand

• Last we have the third voice, the voice of the aspirant, who is looking to build a different vision, they operate mostly in horizon three, believing in different, more pioneering, perhaps radical solutions that seek to visualize things in their ‘ minds eye’. They are far more aspirational. They are looking to explore concepts that often can seemingly look on first ‘sight’ to be totally incompatible to the reality of today, even they can potentially challenge today’s existing core, perhaps cannibalize it or radically alter its very nature. Those operating within this horizon three are often picking up on ‘weak signals’ that are out there that signify a changing future that might impact their own and set about capturing all that can make this a significant game-changer.

It is the combination of these different three voices that need to come together and frame the innovation journey by using the three horizons framework.

Establishing a common understanding of operating in each horizon becomes critical

Innovation is constantly facing disruption; it is constantly going through life cycles and new waves of different activities. We need a far more robust, well thought-through way to apply our innovation resources to meet and anticipate these changing events and for this I always recommend the three horizons.

With the effective use of the three horizons you can see opportunities completely differently beyond the existing mindset and activities, it takes innovation from tactical to strategic, to foresight in your evaluations.

We need common ways to build a language around innovation and its management.

We need common ways to build a language around innovation and its management. As the three horizons can help frame the allocation of resources, determine the innovation road map and contribute to structuring the portfolio into its different parts, it can be essential to this building a common understanding and recognition of its organizing value

Appreciating its evolving value

If you can appreciate the value of the 3H frame in its potential, firstly to aid the mapping out of the present and the challenges the business can find itself in, it gives a common position for all to work through, to find common ground and focus on delivering on the understanding collectively.

The three horizons can help you move towards articulating the road map to the future and provide the encouragement to turn this into the ‘what, when, how and why’ that future innovation always needs figuring out the sorting of the essentials to ‘fuel it’.

It can assist in the evidence-based gathering to exploit (h1), extend or expand (h2) and to explore(h3) how the existing core will grow and be seeded or orientated in future ways. It can be a significant contributor to providing the vision, values and beliefs that an organization can orient towards and work towards.

It can help us break out of existing mindset traps through its evolutionary steps to clarify, explore and identify all the different voices and then explain the “how and where we move towards as our innovating future”.

The 3H is a frame that I genuinely believe is an essential management method for innovation’s good management practice.

In Summary its innovative value to you and your organization

I believe the 3H framing technique that can structure the evolution of the innovation needed within organizations.

It can be based on existing evidence or as we learn, building evidence-based change, so we can use its framing to adjust to new information and knowledge or be adjusted to the changes occurring, that happen in the years ahead, as the organizations move towards their innovating future. It can offer a solid structure to the (strategic) decisions that they have to be made.

Why can’t it additionally become an essential visualizing tool, no different from where the Business Model Canvas has established itself?

It is a frame that should be an essential management method or framing technique that can structure the evolution of the innovation needed, based on existing evidence or as we learn.

We use its framing to adjust to new learning or as changes are occurring in the years ahead and the 3H does give a very essential part of the narrative of innovation, something we often lack.

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Go to the “search” on this site and enter “three horizons” you can view the different articles I’ve published on this, or equally you can download these within different summary series, within my “insights and thinking” page, under the three horizons. They do offer a detailed build on this framework to bring it all together.

The post The Compelling Value of the 3H for Innovation Management first appeared on Building Your Innovation & Ecosystem Intelligence.

As you may know, I have been writing significantly around the Three Horizons in relationship to innovation.

Initially drawing on the foundation within the McKinsey initial papers, updated here under their enduring ideas, and in particular based on by its original authors of the book “The Alchemy of Growth” by Mehrdad Baghai, Steve Coley, David White and Stephen ColeyThen I discovered the work of the International Futures Forum, based in Scotland, where a group of members have extended the 3H significantly, well beyond McK’s initial work from my perspective, into a broader, more robust methodology tackling complex problems.

It was this IFF work that excited me, it opened up my thinking to find better ways to deepen the innovation connections and framing that could be suggested in the use of this three horizon frame in exploring and expanding different techniques and approaches.

Connecting the innovation thinking dots

I realized the significant role the three horizon framework could have within our innovative thinking that was still missing and decided to take this further, beyond the original authors view.

I have written about this since my first post “The three horizon approach to innovation” “in September 2010, after some initial prompting from Tim Kastelle who shares in its value and place in our innovation thinking.

Here I want to provide a common language and approach to the three horizons

I have continued to build my understanding in practice and in my research on the 3H and have published this thinking through a series of articles and posts found as a collection in my insights and thinking page, that focus specifically on relating the 3H to the innovation space for dialogues, planning, portfolio debates, differentiating the distinctions between the three and generally arguing for its value in the management of innovation.

This intent has been to grow awareness and offer a better understanding of how it works, fits and has this great value for innovation’s management that should be within all organizations thinking around working through its innovation ambitions for the future and relating these to the reality of the present.

Go to the “search” on this site and enter “three horizons” you can view the different articles I’ve published on this, or equally you can download these as summary series within my “insights and thinking” page under the three horizons. They do provide a detailed build on this frame.

Understanding the way to approach each of the horizons

I published in August 2011 a suggested: “emerging framework to help navigate across the three horizons” in a further blog which provides clarity of how to structure, frame and think in these different horizons. This is how:

Pushing this thinking further I felt we needed a common metric of understanding

Recently I have taken this further and felt there was a need to provide a common language and application for approaching the three horizons. We need to look beyond where we stand

 These common metrics of understanding I’m publishing for the first time here

I believe this can be adopted as a suggested approach to thinking about each horizon separately, covering this from the many different perspectives. I hope this provides for an even greater adoption of the innovative thinking we all need to have in our planning, discussions and management of innovation.

So each Horizon needs a different focus, a different management approach, different goals and different thinking.

If you would like a copy of this as a pdf or download Three Horizon Common Language Table

It would be great if these were further built upon and accepted, it would help in our management of innovation.

The post The Three Horizons – Providing a Common Language in its Innovation Use first appeared on Building Your Innovation & Ecosystem Intelligence.