Innovation strategy: people first, not process

There is a season for corporate innovation. Somewhere between the end of one financial year and the beginning of serious planning for the next, organisations book a venue outside the city and hold an innovation day.

They are organised almost identically, which is impressive given the subject. The running order goes like this.

1. Put everyone from a single department in one room.
2. Beat them with business numbers until lunch.
3. Set them to work on topics chosen for them until afternoon tea.
4. Produce a reasonably well-known expert to supply projection, visibility and possibly inspiration.
5. Let that expert explain a radically flat organisation nobody in the room will ever work for, or analyse the engineering of a cathedral that will not help anybody on Monday.

To summarise: gather out of context, exclusively with people who do the same job as us, and maximise our chances of finding solutions that suit only us for problems that interest only us. Then close with speeches so far from our reality, our values and the maturity of our customers that only one outcome is available. We will have had a lovely day.

Underneath the format sits the real error. The day treats innovation as a process people are put through, when the people are the variable that decides what comes out. Nobody asks who is in the room and what they are each capable of noticing.

An innovation strategy worth the name is personalised to the people you actually have. It replaces the day with four permanent working groups, one for each of four different strategies: continuous, adjacent, disruptive and breakthrough, with different people in each, drawn from different seniorities, departments and temperaments.

And here is the rule everybody argues with. Those four groups must have no participant in common and must stay as watertight as possible until a six-monthly crossing. Every piece of advice in circulation says break down your silos. I am asking you to build four on purpose, because groups that talk to each other continuously arrive at the same answer.

The inherited reflex	Why the day fails	The strategy that fits
One room, one department, one dayOrganisations gather a single team offsite, present business results, assign topics and finish with an outside speaker. An innovation strategy built this way produces a pleasant day and no change to how the business decides anything.	The guest list, not the agendaEveryone in the room shares a specialty, a set of assumptions and a view of the customer, so the ideas produced are the ideas that group already held. The problem was decided before the venue was booked.	Personalise the strategy to the peopleFour permanent working groups, one per strategy, staffed according to what each person is capable of noticing rather than by job title. No participant sits in two groups, and isolation preserves the difference, since groups in constant contact converge on a single answer.

Why most innovation days produce a nice day out

Before setting out the four groups, it is worth being precise about why the standard format cannot work. The failure is structural rather than a matter of poor facilitation, and it is decided by who was invited rather than by what happened once they arrived.

The anatomy of a corporate innovation day

The sequence is remarkably consistent across industries and countries. A single team is taken out of its usual environment, which is presented as the liberating part and is actually the least important variable in the room.

The morning goes on results, targets and market context, delivered by people who prepared slides rather than questions. By the time anybody is asked to think creatively they have spent three hours being told what the constraints are.

The afternoon runs on assigned topics, which removes the one thing the group might have contributed, namely its own sense of what actually needs solving. Then the speaker arrives to lift the mood.

None of these steps is stupid in isolation. Together they guarantee that whatever emerges will be a slightly bolder version of what the department already believed in the morning.

Why the guest list is the strategy

Put everybody from one department in one room and you have selected for shared assumptions before anyone speaks. They were trained similarly, they read the same trade press, they hear the same customer complaints and they have all inherited the same account of why things are done this way.

What that group produces is not a failure of imagination. It is an accurate reflection of the range of views present, which was narrow when the invitations went out.

Which leads to the conclusion this whole pillar rests on. Your innovation strategy is a guest list rather than a plan, because the composition of the room sets the ceiling on everything that can come out of it.

Getting that composition right also requires people who will contradict the group, and finding them is a recruitment question before it is a facilitation one. I have set out the case for hiring the people who will disagree with you separately.

What an innovation strategy actually has to decide

Australian government guidance frames this reasonably well as far as it goes. The federal advice asks businesses to decide between open innovation, collaborating outside the organisation, and closed innovation, keeping everything in-house, then to update the business plan accordingly.

State guidance goes a step further and links the choice to outcomes. Queensland’s material notes that the type of innovation will be determined by the strategy, and that the strategy depends on the stage a company has reached and where it is heading.

Both are correct and both stop exactly where the difficulty starts. Knowing that you want new products or protected market share does not tell you who to put in a room, how often, or what to stop them doing.

So the three decisions an innovation strategy actually has to make are membership, cadence and separation. Everything else in this article is detail underneath those three.

Four strategies, four groups, no shared members

The proposal is four distinct working groups running permanently, each pursuing a different kind of innovation, each with its own membership, and each kept deliberately out of contact with the others. It is more demanding than a day out and considerably cheaper.

Why four rather than one

There is more to innovation than continuous or disruptive, which is the false binary most organisations operate inside. Four strategies cover the field: continuous, adjacent, disruptive and breakthrough.

They are not four intensities of the same activity. Each reads different signals, needs different people in the room, uses different tools and fails in a different way, which is precisely why one group cannot pursue all four.

A single group asked to consider everything will default to the most comfortable of the four, and that is almost always continuous work wearing a more ambitious label. The four-group structure removes that option by construction.

The two most frequently confused are disruptive and breakthrough, which are separate practices carrying separate levels of risk. I have set out the difference between disruptive and breakthrough innovation in detail, along with the two unrelated origins of the word disruption.

Engineered isolation, and why contamination produces convergence

Here is the rule that gets argued with in every session. The four groups must be organised independently and must have no participant in common, and they should stay as watertight as possible between crossings.

Every piece of received wisdom points the other way. Break down silos, work cross-functionally, integrate the organisation, keep everybody aligned. All of that is excellent advice for delivery and actively harmful for divergence.

The mechanism is simple enough to state and uncomfortable to accept. Groups in continuous contact converge, because each one hears the others’ reasoning, absorbs their constraints and adopts their vocabulary, and within two months four different perspectives have become one perspective with four names.

Isolation preserves variance. Each group develops its own dynamic and its own small culture of innovation without being influenced by the others, which is the only reliable way to end up with four genuinely different sets of ideas rather than one set discussed four times.

It also suppresses two failure modes the collaboration literature rarely addresses in this context. Confirmation bias and groupthink both intensify when the same people work together over long periods, and rotating perspectives between groups reintroduces exactly what you were trying to keep apart.

The six-monthly crossing

Isolation is a phase rather than a permanent condition. Twice a year the four groups meet for two or three days, cross their findings and work on turning ideas into something real.

The value sits in the collision. Ideas arriving from four separately developed perspectives produce combinations none of the groups would have reached alone, and that is where the most original concepts tend to appear.

The crossing does something political as well. It creates healthy competition between groups and a strong motivation to arrive with something bold, since nobody wants to be the group that spent six months producing a tidy list of minor improvements.

Two or three days is the right length and shorter does not work. A half-day crossing becomes a presentation round, and the useful part is the argument that starts on the afternoon of day one.

Running it with fewer people

The obvious objection from any Australian business under a hundred staff is that four watertight groups is arithmetically impossible. That objection is right about the arithmetic and wrong about the rule.

What matters is no shared participants, not group size. Four groups of three works. Four groups of two, each with one external participant, works better than most groups of ten I have seen.

Where the numbers genuinely will not stretch, run two groups in alternate quarters rather than four simultaneously. Continuous and adjacent in the first half, disruptive and breakthrough in the second, with the crossing at the year mark.

What does not work is one group of twelve pretending to be four. The moment the same person sits in two groups, both groups inherit that person’s assumptions and the whole point of the separation has gone.

Small businesses also have an advantage here that larger ones lack. Bringing in outsiders, a customer, a supplier, somebody from an unrelated industry, is far easier when there is no procurement process attached to it.

The continuous innovation strategy

Continuous or incremental innovation improves products and services that already exist, to optimise how they are made and used and, more prosaically, to answer the improvements customers have already asked for. Version one becomes version two, two becomes 2.1, five becomes 5S, and so on until the product reaches the end of its life.

What this group is looking for

The territory is your existing offer and your existing market. Nothing about who you serve changes, and the question is what would make the thing measurably better for the people already buying it.

It is the least fashionable of the four strategies and it carries the highest success rate by a wide margin, because the demand is already proven and the feedback loop is short.

Most businesses need this group and most boards want to talk about a different one. A continuous group that ships reliably also builds the organisational muscle every later strategy consumes, which is the discipline of actually finishing something.

Tools: open innovation and the SCALE grid

The best known continuous improvement methodologies run on open innovation, using idea management platforms to collect and rank suggestions at volume. That approach leans on internal resources and skills interrogating customer feedback.

The alternative I use is a grid I call SCALE, which is a pragmatic approach that sits alongside customer feedback and sales analysis rather than replacing either.

• Select. Pick the component or function with the most leverage on customer satisfaction and sales. Mainly sales.
• Constrain. Write down the specification constraints that would allow an ambitious improvement. Something along the lines of changing the shape of the power cord for the fourth time.
• Amend. Modify specific characteristics to deliver technical or ergonomic improvements, with help from your suppliers.
• Link to the system. Check that the improvement is technically and functionally coherent with everything around it. The aim is to improve things rather than to change them.
• Evaluate. Test the reception with customers to establish whether the progress is sufficient and pointed at the right thing. Design thinking, did somebody say design thinking?

The grid earns its place because it forces the constraint step, which most continuous improvement skips. An improvement with no stated constraint becomes a wish list, and a wish list never ships.

Who to invite to the continuous group

The membership needs deep familiarity with the existing product and its ecosystem, and one or two people with no stake in defending it.

• Customers, obviously the most concerned party. That does not remove the need for a wider satisfaction survey beforehand.
• Your competitors’ customers. Why are they not yours? Is it a feature problem, a communication problem or a relationship problem?
• Somebody who dislikes your products. If it turns out not to be useful it should at least be entertaining.
• One or more suppliers, since improving something can also mean making it cheaper, and it improves your leverage on price.
• Your usual co-conspirators from the coffee machine, the ones in sales, marketing and finance. The operative words there are the ones about actually doing the work.
• Staff whose ideas surface through whatever idea collection system you run.

Beyond that, technical depth helps: people who know the product intimately, understand how it is made, and can see where an ergonomic or process change would land. What this group does not need is a futurist.

The adjacent innovation strategy

Adjacent innovation is one of the most widely used ways of extending a product’s life. It keeps the capability and changes who it is for, and in English it also travels under the name new market innovation.

Two directions, pollination and capillarity

There are two kinds of adjacent move, one inward and one outward, and they require different searching.

Inward, by pollination. A product, service or process from another economic sector gets imported into your business. The best known example is Dyson miniaturising the extraction system used in a sawmill to build a bagless vacuum cleaner.

Outward, by capillarity. A new use for an existing product is discovered and creates a new market. The best known example is Gore, which moved from dental floss to guitar strings, to shorten a much longer story.

This kind of innovation underpins the wider movement from selling products to selling solutions, as set out in the shift from the four Ps to the SAVE model.

An adjacent group is often the natural next step after a continuous one, because the work can be remarkably simple. Sometimes all it takes to put an existing product into a new market is educating your current customers about the other uses, which is what a well known glass cleaner has done through lifehacking videos explaining that the product also handles ants, limescale, stains and odours.

In other cases the product needs modifying to meet the codes of another market, which is what Apple did in moving between its music player and its phone. Either way, treat the new market as unexplored territory where you have to prove the value of your solution rather than assume it.

Tools: Trendstorming and deliberate exposure

Adjacent innovations very often arrive by serendipity, so rather than a single tool the starting point is developing curiosity among your people and then installing practices that force new crossings. That requires a different approach to discovering customer needs, consumption trends, new business models, competitive dynamics and technology movements.

Among the available methods, which run from subscribing to every specialist magazine through to sending the whole team to independently organised talks, the simplest to implement is Trendstorming. It is a brainstorm built on trends rather than on ideas.

The method catalogues the most significant movements across several families, environment, economy, technology and so on, identifies their effects on customer expectations, sales channels and production processes, then looks for the adjacent innovation sitting at the intersection. Application plus social networks plus connection plus simplicity plus community produces something like Waze.

The second tool is deliberate exposure to outside expertise, whether through lunch sessions or by encouraging people individually to attend conferences and seminars, with one rule attached. The subject must have nothing directly to do with that person’s job or the company’s market.

You can push this considerably further. Procter and Gamble built a network of seventy technology entrepreneurs charged with identifying promising adjacencies around the world, which is the industrial version of the same instinct. The underlying method is deliberate borrowing across fields, which I have written about as cross-pollination and adjacent innovation.

Who to invite to the adjacent group

This group needs one person in particular, and they are the hardest to recruit internally.

A facilitator who does not necessarily know your products, and therefore arrives without functional fixedness. Being functionally rigid means seeing only one use for a thing. A nail can only be driven with a hammer, for instance, when in practice you can drive a nail perfectly well with a shifting spanner, the heel of a boot or the base of a cast iron pan.

• Staff who have suggested offbeat uses for your products, especially the suggestions that were dismissed.
• Staff with a passion or a specific expertise outside work, who are able to think about your products inside their own non-professional world.
• Anybody you can find on lifestyle or lifehacking sites who has published content repurposing your product.
• Somebody who has run a successful pivot or diversification in an entirely different industry.

The composition rule for this group is variety of expertise rather than depth in yours. Openness and unexpected connections are what you are buying, and a room of specialists in your own product will not supply either.

The disruptive innovation strategy

You have heard the words rupture and disruption often enough that they have become as common and as empty as the word innovation itself. Excellent examples of jargon turned pompous, both of them earning a square on the bingo card.

What this group is looking for

Disruption gets used as a synonym for radical or breakthrough work, and it is nothing of the kind. In Clayton Christensen’s sense the term has a precise definition drawn from analysing why large companies fail, and the analysis is worth having straight.

His central finding is that big companies over-serve. Each increment adds features until the product becomes too expensive and too complicated to use, which opens a commercial opening for solutions better matched to what people actually need.

Those emerging products first appeal to the customers judged least profitable, then gain traction among more sophisticated buyers who recognise they do not need everything they are currently paying for. So a disruptive innovation is any solution that is simple, inexpensive and easy to obtain.

Digital delivery makes that easier, and concluding that a digital business is therefore disruptive is a shortcut too far. The two practices most often confused here are disruptive and breakthrough, which I have separated in the piece comparing the two, along with where the definition currently stands.

Tools: trends and subtraction

Since the aim of disruptive work is turning something scarce into a commodity available to everyone, the method leverages the large movements: technological, societal, social, managerial. Two approaches are simple enough to run without a consultant.

First, a Trendstorming session, which this group will have seen used by the adjacent group. After cataloguing the movements that matter, look for the disruptive opening sitting at their intersection.

Second, subtraction, in the spirit of the minimum viable product. Identify the competitors who have exceeded their customers’ requirements to the point where the solution is far more advanced and expensive than the need, then strip back to a single promise and a single function rather than a feature list.

That single promise is the classic one-sentence proposition of a start-up landing page, and writing it is harder than it looks. A group that cannot compress the offer into one sentence has not finished subtracting.

Who to invite to the disruptive group

This is the group where outside perspective matters most, because the whole exercise involves taking seriously a customer your organisation has decided not to want.

• Whoever is responsible for foresight, trends and marketing, for their capacity to read the current environment and imagine the next strategy.
• Specialists in demography, environment, technology, society and economics, to name only a few. They can be invited to speak or brought into a workshop.
• Unhappy customers, and just as usefully very happy ones who do not use most of the features they were sold.
• Somebody who has launched a genuinely low-cost product in another sector and can explain what it cost them internally.
• People representing the customers your current offer excludes or serves badly.

That second-to-last item is the one organisations resist. A disruptive group with nobody in it who has ever sold something cheap will design an expensive product and call it accessible.

The business model question sits close behind, since serving a customer at a fraction of your usual price requires a different way of charging. That connects directly to the work on opportunities and business models.

The breakthrough innovation strategy

This is the strategy most often confused with disruption, and they are two different practices carrying two different levels of risk. Where disruptive innovation adapts to an environment, breakthrough innovation, called innovation radicale in French, takes three positions that all sound reckless.

The three positions it takes

First, that waiting can be worthwhile, because customer preference can turn against your competitors at any moment and at that point those customers will be looking for an alternative. The long argument between open and closed computing architectures, with their very different design philosophies, shows the pattern: one approach looked correct for years, then the other did, and neither party changed position while the tide moved.

Second, that it can be productive, instructive and profitable to simply do the reverse of what competitors do, betting everything on difference.

Third, that listening to customers is dangerous, because they sometimes do not know their own needs. On this view it is better to put people in front of something new and accept the reaction, which can resemble a chicken confronting a fork, and can be outright rejection when a familiar port disappears from a device.

The margin between this and simple arrogance is narrow, and the margin is evidence. Ignoring what customers say about something they have never seen is defensible. Ignoring what they say about something they have used for two years is not.

Tools: clichés and blue oceans

There are a dozen exercises for challenging the limits of what is possible. Two do most of the work.

The first is finding your competitors’ clichés, meaning the elements they all share, the commercial and marketing practices every one of them uses and which make them indistinguishable from each other, and then doing the opposite. The only constraint is that the inversion must not touch safety or credibility.

Restaurants make the exercise legible. The clichés are handing over the menu before the meal, offering a three-course structure, and presenting a bill tied to ingredient cost and service. El Bulli, until it closed in 2011, ran a thirty-course menu, handed the menu over at the end of the meal, and charged for an experience rather than for food.

The second is looking for an uncontested space, which W. Chan Kim and Renée Mauborgne named a blue ocean. Their wine example is instructive precisely because it was copied: one brand created genuine differentiation and a procession of animal-labelled competitors followed within a few years, which tells you a blue ocean is a temporary condition.

Which is why I look for what I call a pink ocean instead. A position so marked by the values it carries that competitors will not copy it, because copying would require becoming something they are not. Personally it would not occur to me to wear pink. In wine, the pink ocean is the can, and it will be a while before a first-growth estate follows.

Who to invite to the breakthrough group

This membership is the most deliberately awkward of the four, and the awkwardness is the product.

• Iconoclasts. The colleagues known for speaking plainly, who are not afraid to say what they think or to look ridiculous asking a question.
• Your competitors’ customers, who can describe the conventions of your category from the receiving end.
• Somebody whose explicit job in the room is to question conventional ideas and push the group to think differently.
• An entrepreneur from outside your industry entirely, for a perspective with no accumulated bias in it.
• Somebody whose work is anticipating future trends and needs rather than describing current ones.

The iconoclast is the load-bearing member and the hardest to keep. An organisation that recruits one and then evaluates them on not making waves has removed the only person capable of naming a convention out loud, which is the failure I have described at length in the piece on hiring for cognitive diversity.

One warning about the appointed devil’s advocate. Research on authentic against role-played dissent finds that a person performing disagreement produces considerably less divergent thinking than a person who actually disagrees, so use the role as a supplement rather than as a substitute for the iconoclast.

Which group should you start with?

Four groups is the destination rather than the starting point, and most organisations should stand up one or two first. The choice depends on where the current failure is showing rather than on which strategy sounds most ambitious.

The four groups compared

Read the signal column before the ambition column. The group you need is almost never the group the leadership team wants to discuss.

Group	What it changes	Signal you need it first	Core tool	Who makes it work
Continuous	The existing offer for the existing market	Customer complaints repeat and nothing ships	The SCALE grid	Customers, suppliers and people who know the product intimately
Adjacent	Who the capability is sold to	Growth has stalled while the capability is still strong	Trendstorming	A facilitator with no functional fixedness
Disruptive	Which customer you will serve, and at what margin	A cheaper entrant is taking the customers you declined	Subtraction to one promise	Someone who has sold something genuinely low-cost
Breakthrough	A convention the whole category obeys	You are indistinguishable from three competitors	Cliché inversion	An iconoclast nobody has trained out of it

Which signals point to which group

Start with the honest question rather than the aspirational one. When did your organisation last ship an improvement that a customer noticed, and did it finish?

If the answer is uncomfortable, the continuous group comes first regardless of what the strategy deck says, because the discipline of finishing is what every later group consumes.

If improvements ship reliably but growth has stopped, stand up the adjacent group, since your capability is probably worth more in a market you have not entered than in the one you have saturated.

The disruptive and breakthrough groups both require capability the first two build, and standing them up first produces an innovation lab with a press release attached. The exception is a business with nothing to defend, since a new venture starts wherever it likes.

How I can help you set the groups up

The hard part of this is never the four definitions. It is deciding who goes in which room, defending the separation against the first executive who wants to sit in all four, and holding the six-monthly crossing to something more than a presentation round.

Workshops and masterclasses

The workshop drafts the four invitation lists with a leadership team, live, and the argument that follows is the useful part. It is usually about which senior person is not going to be in any of the groups.

Masterclasses run one group’s method properly rather than sampling four. A day on cliché inversion or a day on Trendstorming produces material a group can keep working with, which a survey of all four never does.

Keynotes and diagnostics

If you are booking a speaker for an innovation day, brief me against the field note above. The most valuable hour I can spend with a room that shares one director is the hour where we redesign the guest list rather than the agenda.

The diagnostic establishes which group you should stand up first and whether your structure could carry it, since funding thresholds and margin tests kill more innovation than culture does. You can see how the sessions are built on my speaking page.

If you want to test any of this, a conversation beats a proposal. You can tell me who was in the room at your last innovation day and we will work out what that guaranteed.

Conclusion: build four silos on purpose

There is a great deal more to say, and the point worth ending on is the one that gets argued with hardest. The four groups must be organised independently and must have no participant in common.

Keep them as watertight as you can until a six-monthly meeting where all four cross their findings and spend two or three days turning ideas into something real. Separation lets each group build its own dynamic and its own culture of innovation without being influenced by the others, and the collision at the crossing is where the least predictable concepts appear.

The separation also does something the collaboration literature will not tell you. It suppresses the confirmation bias and groupthink that build up whenever the same people work together for long enough, and it guarantees a constant renewal of perspectives rather than a slow convergence on one.

Which is why a generic innovation process cannot work and a personalised innovation strategy can. The four strategies are the same in every organisation and the four rooms never are, because they are staffed from the specific people you happen to employ and whatever each of them is able to notice.

So an innovation strategy is not a document about ambition, and it is not a process to put people through. It is four invitation lists, a cadence, and the discipline to keep four groups apart while everybody tells you to bring them together. Decide who is in which room and the rest of it follows.

Frequently asked questions about innovation strategy