Ringing The Cash Register (With Innovation)

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I wrote last week that the value of technology is less about technology and more about your business. I consider three “must have” cases for making any kind of investment in it:

  • Dramatically increasing revenue
  • Radically reducing costs
  • Enabling a previously unavailable strategic capability

There’s a lot of cool technology available every day. It’s incredible the power of our phones (there’s 100,000 times the computing power in our phones than was in the computer that guided the LEM to the surface of the moon on Apollo 11).

Phone apps are useful for personal productivity, communications, financial management, and other idiosyncratic (peculiar to us) categories, but they don’t always work as well when extending to the enterprise. In my previous work at PwC, we struggled to create the same kind of productivity boost for 60,000 people using a firm-mandated social messaging app. Despite our best effort to simplify, standardize and centralize, our staff was more comfortable using what they already knew. We all likely have stories of technology we thought would lead to business value that failed to achieve our expectations.

So how do you make innovation real in terms of business value? Geoffrey Moore advocates an approach that rings true to me (Crossing the Chasm, Dealing with Darwin), as shown here.

Innovation starts as an idea in Quadrant one. It has little or no strategic or cash value. Through assessing feasibility, a company can promote a few promising ideas to Quadrant two, where they are given to someone to sponsor and supported with some structured process and technology. While there’s still no financial value, management can better see where some innovation now connects with a business value (revenue, cost, capability) and progresses to Quadrant three. At that point, you have a capability that is generating real, tangible value, both strategically and financially. After a certain period (maybe years), other innovation will supplant these, and they will advance to Quadrant four (aka a “cash cow”) where your company is realizing a financial value but no longer investing in its strategic value.

You use the cash flow generated by Quadrant four items to repurpose back into Quadrants one and two to fund fresh and new innovation.

Quadrant

This model demonstrates a way to look at innovation as a process, just like other business processes. Who’s the best in the world at this approach? Apple. Every so many years they almost completely replace their previous revenue stream with something else. Where would they be without an innovation pipeline? Sure, there are times someone might bring a great idea into a meeting that is actionable across your company. Still, there are other reasons for having an innovation process: your people and your innovation pipeline. Creating a process owned by a senior leader looking to his/her team to innovate is useful for motivating your people. They are often the first to realize where the opportunities are. They just need some structure to know how to convert an idea into something of value. Having a pipeline of opportunities means you always have internal investments to assess, and in the dynamic environment we are all living in today, that’s a good thing.

As always, let me or one of the partners at BKM Sowan Horan know if we can assist you with thinking about using an investment in technology to enable business value.