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The Elements of an Innovation Management System

As I introduced in my blog posting, Amazon is Wasting Day One, an Innovation Management System is the totality of how an organization manages innovation: all formal and informal processes, the employee performance management and incentive system, the product development processes, etc. In a highly innovative company, these will all be aligned toward the same goal of enabling innovation.

Unfortunately, in a far majority of companies, innovation is something that often happens via chance, and rarely is it approached systemically. That has led to the general belief that innovation occurs randomly, and only via the luck of having the right people, in the right situation, at the right time. That’s a very discouraging mindset, and one that is entirely wrong! Instead, innovation can be managed similarly to any other business function once the underlying principles of it are understood. Once managed, it can be harnessed to enable significant business improvement and growth.


For this blog posting, I’m going to skip over some key concepts, such as what “innovation” actually means, or how innovation supports growth. I’m going to assume that whoever is reading this understands those concepts to some degree, and I will go deeper into those in a future blog posting. Instead, this posting will focus on the key elements of an innovation management system.


A quick note about innovation theory: there’s a ton of it, and consultants make many millions of dollars telling people about it and the latest abstract theory. Every major consultancy has their preferred approach, every boutique consulting practice has their own, and there are many thousands of books on the subject. Even with that, most innovation projects still fail (96% of the time according to Deloitte), so something doesn’t work with those theories.

So, instead of providing yet another theory, my goal is to instead provide specific models and mechanisms that organizations can replicate to increase innovation, as there is no single silver bullet. It’s the accumulation of all the innovation-enabling processes within a company that create the conditions for innovation, and organizations can begin improving their innovation practices by first understanding general innovation theory, and then over time implementing practices that build the conditions for continuous innovation. Instead of thinking of innovation as luck, you need to think about it like architecture: how do you design an organization to be successful at innovation?


I refer generally to my approach as the Day One Innovation Management System since it is pieced together from mechanisms Amazon has proven successful, which start with the mindset and opportunity and enthusiasm of it always being “Day One”. I’ve taken those mechanisms, aligned them to known and established business and innovation theory, and then added, reprioritized, and changed what Amazon has done to address areas in which it fails, or has greater opportunity to improve. I’ve incorporated the most useful theory from innovation leaders such as Clayton Christensen, Eric Ries, and many others, and I expect to continually refine the system as I gain experience implementing it with clients, and incorporate new ideas and theories.


So, what makes up an innovation management system? At the highest level, there are eight organizational elements that, combined together, control how innovation occurs within a company. I’ve borrowed and tweaked these from an excellent 2019 study done by Magnus Karlsson and Mats Magnusson, who did an analysis of 19 different innovation frameworks used globally to see what was consistent. I’ve combined that with some of the ISO 56000 framework concepts, and my own experience, to adjust and describe the elements in a more useful way. Here they are, with a short description:

  1. Leadership: Organizational leaders need to recognize the importance of innovation to growth and company success, develop themselves and future leaders with the skills and desire to prioritize innovation efforts, and structure the organization for innovation success.

  2. Environmental Context: An organization needs to have a clear understanding of the environment it operates within: economic, market, competitive, labor, and innovation, both internally and externally. Further, it needs to continuously review the environment for new opportunities and risks.

  3. Direction: An organization needs an effective, stable vision that guides innovation, following with a well-reasoned business model, implementation strategy, and clear objectives and goals to how they will be accomplished.

  4. Organizational Structures: An organization needs to be designed to enable innovation at speed, reducing barriers and aligning internal teams and external partners to organizational goals.

  5. Resourcing, People, and Tools: Resourcing is the primary input to innovation: research and development costs, employee labor, employee skills, and performance management require dedicated focus on innovation. Tooling, such as experimentation or continuous deployment software, increase effectiveness of resourcing in innovation activities.

  6. Values and Culture: An organization needs to develop a value system and culture that is explicitly built to enable innovation at all levels, prioritizing and rewarding ideation, experimentation, success, and failure.

  7. Processes: Innovation should be built intentionally into core company processes, starting with establishing the innovation management system approach, and spanning how market research, ideation, prioritization, experimentation, implementation, and other related activities occur.

  8. Evaluation: Successful innovation requires constant monitoring and analysis to identify if it is meeting the intended results, and identify learnings for use in future efforts. Developing a data-driven culture with metrics, monitoring, management review, and feedback enables ongoing improvement.

Of course, there is a huge variety of ways to implement innovation into each element. I’ll be going over some high-level approaches and specific mechanisms in future blog postings. In the meantime, here’s a simple exercise for any organizational or product leader to complete:

  1. Take the list of 8 elements and ask yourself how well your current organization has built it into your organization today. Consider scoring them 0-10 (10 high) to help you know where your biggest opportunities are. I did this below for Amazon as an example.

  2. Jot down one idea you have for improving any element, your hypothesis on why you think it will help innovation, and how you will measure whether it does.

  3. Share your idea with a few other people for feedback.

  4. Create a plan to have it implemented within 2 weeks. Push yourself to do it quickly!

Innovation is all about hypothesizing what will help you meet your goals, and then doing it, so get started! I could say to start with Leadership and Direction, which is ultimately the most important (there is no sense in innovating without a clear goal to innovate against), but those are often the most time-consuming to define. Instead, consider looking for a small procedural, resourcing, or cultural change you can implement. It can be as simple as asking your team to specifically look for innovation opportunities, or discussing with them what innovation means.


Here’s my opinion Amazon’s score overall against these elements. It’s difficult to estimate a single score, as many sub-organizations may excel or struggle individually with these, but I think my ranking is overall fair for the overall company. The result? Amazons scores a 66%. Do you agree? Let me know!

Innovation Element

Amazon’s Score (0-10)

Leadership

7

​Environmental Context

7

Direction

8

Organizational Structures

8

Resourcing, People, and Tools

5

Values and Culture

6

Processes

4

Evaluation

8

53 of 80 (66%)



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