So, you just presented to your leadership team on the innovation portfolio and how it was going to contribute to value to the company. Your slide to communicate that value was simple: on one side of the chart, you had a stack of $1 bills with an arrow pointing, on the other side, to a stack of $100 bills.
“Got it, love it, now go!” is what the leadership team told you once you showed them this slide. “But,” they added, “show me how you’re going to move from the Washingtons (the $1 bills) to the Franklins (the $100 bills) and how you’re going to help me talk about the value of our innovation portfolio to others, including our stakeholders.”
And now, the fun begins.
Here’s the issue:
Innovation is about making bets – ranging from incremental to breakthrough – the big bets that move if not markets, then at least new platforms (to use the fancy word of the day) of distinctive and profitable growth. Bets are always about figuring out the appropriate risk / reward profile you are willing to make. Such profiles reflect differing degrees of uncertainty about the future. So, essentially, figuring how to measure one’s innovation portfolio boils down to how to frame expectations and projections around what we think the future will look like. Always a challenge.
Clearly, we can never know what the future will look like. However, we can, and do, know two things.
- First, whatever we think the future will look like, it won’t. It will be different: technologies change, new competitors arise, regulations shift, customer expectations evolve. Therefore, it makes more sense to get insight into different possible futures, and the conditions – the technologies, competitors, regulations, customer expectations – that give rise to them.
- Second, we know that different types of stakeholders care about – or value – different things, both within and outside your business. Just to take one example, executives in charge of sustainability – whether at Nike, Boeing, CitiGroup, Unifrax, or wherever – tend to define value in terms of reducing a company’s carbon footprint, among other sustainability-outcome measures. Executives responsible for public relations and marketing tend to define value in terms of brand equity and customer satisfaction. Other executives, from other industries, such as healthcare, define value other ways: in terms of clinical outcomes or population health measures, for example. Each and all of these motivate people to act in ways that align with what matters, and how they define value; after all, as the adage goes, you get what you measure. And, each of these *is* measurable. All of these reflect a type of value that motivates behavior of the folks who care about them. Each of these reflects a different unit of value – let’s call it a “currency”. Consequently, each of these reflect a different type of value – or currency – that is meaningful (important to people), material (can be measured) and motivational (gets people to act in certain ways).
If motivation is driven by different types of value that matters, then don’t we need to have a common way to figure out: a) what *does* matter and b) how to get more of it to those who care about it? Currencies are no more than a way to get different folks who care about different types of value to share a common language and thereby increase the likelihood of acting in service to capturing new sources of value.
We have found this simple concept of “currencies” to be (pragmatically) powerful.
- First, it has enabled executive teams to share a common language. Here’s a question for you. How many times have you been in meetings where folks used the same words and appeared to be in agreement, but when they went back to their office and their teams said, I’m not sure what we agreed to, or recognized that folks may have used the same words, but meant different things by them leading to mis-alignment of what needed to get done? The very exercise of creating “possible worlds” typically forces new ways to think about possibilities. One output of this is often the creation of a new, a shared, language of what might be possible, and what types of value might be created as a result.
- Second, it provides a common unit of value for discussions on different types of value. The concept of currencies is based on building a common language around different types of value that motivate action from different folks – both inside as well as outside your organization. Having a “common language” around the broadening of value – recognizing that different types of value are equally critical to motivate different types of folks, both within their organization as well as in their ecosystem – provides new ways for them to answer the question of “when will we realize different types of value under different conditions” – one of the most important questions to ask and answer when we are trying to figure out how to get from the Washingtons to the Franklins.
- And third, exploring possibilities leads to discussions of what capabilities are needed to capture different types of value, as well as how and when to do so. Seldom does any particular firm have all of the capabilities needed to capture new sources of value. Businesses are optimized for a world that no longer exists. They perform well, based on customer needs, technology affordances and market conditions at any one particular point in time. This is why innovation becomes so critical, and why there is so much discussion on the criticality to be agile, to adapt and to innovate. A quick reflection on the accelerating topple rates is a blunt reminder why this is so critical. However, the key question to consider is not which capabilities will be needed to capture emerging sources of value, but which ones do we want to have to do so? Clearly, we can’t have them all (unless, of course, you are in the ranks of Google, Apple, Amazon and Facebook). So, which ones do you focus on, which do you partner for, which do you monitor and which do you merely ignore. And, underlying these considerations is the key question, how *do* you orchestrate your ecosystem and the capabilities distributed throughout it in a way that helps you capture the types – and amount – of value that matters to you?
The revised question of “how do we capture different types of value under different conditions” unpacks into a rich set of considerations to explore another time.
Strategic Edge 