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Effective innovation practices lead to creative problem solving, increased market share and growing profits.
While innovation cannot be taught, it can be collectively fostered and nurtured at all levels of your company with a solid, organized framework and powerful innovation stack.
Our goal in this article is to help you understand what the innovation stack is, and to see how your company can benefit from a structured approach to innovation.
First Things First: Understanding the Innovation Stack
The innovation stack is a business model developed at Johns Hopkins University that defines the different types of possible innovation within an organization.
Inspired by the term “software stack” in digital development, the innovation stack is a 4-tier hierarchy where each step works in tandem with the rest. When properly implemented, the right innovation stack can help companies develop successful new products and services in a conscious and purposeful way.
The four levels of the innovation stack pyramid are management innovation, strategic innovation, product innovation and operational innovation.
The Top Tier: Management Innovation
Management innovation is the most critical part of the stack, at the top of the pyramid. When management thinks outside of the box, they inspire their staff to be creative, who in turn, can produce or discover unique advantages the competitors would struggle to match.
Companies that focus on management innovation give top executives the leeway to think differently and be flexible. It is how business wars are won, and how companies are able to achieve boundary-breaking collaborations. Management is a crucial part of any company’s innovation path, and if approached with an open mind can disrupt processes, products and even entire industries.
It is up to the management team to infuse the company culture with innovative spirit, from the top down.
It is up to the management team to infuse the company culture with innovative spirit. Click To TweetA New Market Lens: Strategic Innovation
Simply put, strategic innovation is a company’s ability to sell differently.
Regardless of what a company does, this layer of the innovation stack is about designing — or redesigning — corporate strategy to make it vigorously growth focused while keeping an eye on the company’s unique competitive advantage.
Companies can encourage strategic innovation by examining the competitive landscape, identifying their differentiators and understanding their impact on the market. In doing so, they will be able to determine whether they are merely undergoing rapid growth or disrupting the market.
While the former is guided by motives of efficiency, effectiveness, and profitability, the latter strengthens an enterprise’s position in the market and can only truly happen when strategic innovation takes place.
AirBnB is an example of a company that employed a unique strategic innovation method. By viewing personal apartments as a viable alternative to hotels, AirBnB was strategically innovative and different in the market. This new way of looking at the hospitality industry helped them undergo rapid growth and positioned them as one of the most innovative companies in the world.
A Unified Platform for Better Product Innovation
While management and strategic innovation drive long-term success, product innovation is the (relatively) short-term step to keep sales up, prevent product obsolescence and win in emerging markets.
The product innovation step of the innovation stack refers to the act of improving a product or introducing a new one in order to help a company establish superiority, disrupt the status-quo and transform new markets.
A great way to innovate at the product level is by collaborating with startups to run proof-of-concepts (PoCs). When running a PoC, companies are able to examine the validity and scalability of new solutions without impacting current operations.
Collaborating with startups to run proof-of-concepts is a great way to innovate at the product level. Click To TweetTo ensure that PoCs are managed in an efficient way and move innovation forward, enterprises need a powerful PoC platform. Without a solution in place to help them configure testing environments and analyze and evaluate results, the effectiveness will be difficult to assess.
A good end-to-end PoC platform is therefore a must for enterprise innovation as it streamlines product innovation, making it faster, cheaper and more efficient.
A streamlined innovation process helps companies free up resources, allowing them to make better-informed decisions about adopting new technologies.
A Complex Endeavor: Operational Innovation
The bottom layer in the innovation stack pyramid is operational innovation.
Operational innovation is the invention and deployment of new ways of doing work that help out-operate competitors. This type of innovation cannot be protected with trademarks or patents, and it can be easily copied, commodified and even outsourced. Because of this, operational innovation had the highest impact on organizations both historically and in recent years.
There are several steps to successful operational innovation. If your company sets too narrow a scope, you’ll make incremental improvements only. To address the full range of operational issues, companies must focus on all relevant departments and activities. In doing so, they are able to take all the necessary steps to improve performance in the long run.
With one of the largest supply chains in the world and 11,100 stores in 27 countries, Walmart shows the impact operational innovation can have. Walmart transformed their operational structure when they turned to cross-docking to overhaul operations — unloading materials from incoming trucks and loading them directly into outbound ones, with little or no storage in between. Such a move may sound simple, but developing the idea and managing it wisely is a complex endeavor that requires creative thinking, concerted effort, and careful planning.
Your Roadmap for Success
To continue to stay relevant and competitive, your company must implement the full innovation stack to improve your capabilities in all fronts. While management and strategic innovation are critical for long-term success, product and operational innovation are necessities for short-term, ongoing and project-based success.
Management and strategic innovation efforts are likely to follow in the footsteps of executives’ overarching ideas and goals, whereas product and operational innovation are more about everyday practice.
All stages are needed to disrupt markets continually and profitably, and all need to work in tandem. For a future that is not limited to today’s thinking, companies must opt for a structured, organized innovation process.
For more on how to bring your company’s innovation to the next level check out 4 Things for an Enterprise to Consider When Acquiring a Startup
