W.W. Grainger, Inc.
How many of us look at the latest tablet device or smartphone, the latest social network, or the latest loyalty programme and think, 'if only I/my organisation had had that idea'?
Adrian Furner,Founding Partner,
Kommercialize COMMERCIAL INNOVATION by design
If you step back a moment and create an “if only …” list for you or your organisation and then look at its contents then it is likely that you'll see an interesting trend and one which is important for our profession. You will likely see that your list is made up of offerings that when you dig beneath the surface are based on not just product innovation but a blend of product innovation and “commercial innovation” such as a novel business model, a new channel, brand enhancement or extension, leverage of core processes or standards.
Example – Publishing / Book Retailing
An example of this is the approach that a new player in the book retail sector took to adapting the relationship they had with the publishers. They moved from the sector norm of buying on a 'sale or return' basis a 'firm-sale' basis, in effect removing the ability to return the books if they didn't sell. In return for this change to the relationship and in effect the T&Cs of trading they were able to get access to books at a lower price than their competition. This coupled with access and control of a direct distribution model allowed them to create a business that with other commercial innovations along the way is today one of the largest sellers of books in the UK.
Whilst there have been good examples of the use of commercial innovation over the years, with recent market and technology innovations organisations are increasingly looking to a greater use of commercial innovation to drive competitive advantage.
Traditionally, innovation has been seen as a product centric set of activities revolving around the process of identifying new or novel technologies, developing them, and then bringing them to market either as a new product or as an improvement to an existing product, usually through existing channels.
Increasingly to be successful and create differentiation organisations are having to challenge themselves to look wider than this and to bring together and align a mix of innovations.
The Innovation Process – a move to five phases from three
If we look at the traditional product centric innovation lifecycle then simplistically there are three main phases: invention; product development; and commercialization.
The invention phase would likely have been the preserve of business development, technologists and scientists who would bring market needs together with the potential for science/technology to deliver a solution. In broad terms the product would then have been developed, often bringing in various engineering skills to the blend. It is likely that only in the later stages of the prototyping and testing would there be an increased involvement by contracting, procurement, supply chain and legal functions in order to package it for the market.
With an increasing move towards a more holistic view of innovation blending product and commercial innovations together there is a need to review the traditional model. Whereas in the traditional model there were three broad phases, in order to bring focus on to the wider range of innovation types there is a need to break down the development and commercialization phases in order to create an innovation lifecycle that has five phases: invention; conceptualization; productisation; commercialization; and monetization.
By doing this it allows organisations to consciously bring in relevant expertise at an early enough stage in the process to create and develop the various strands innovation in an aligned manner.
In addition with the traditional lifecycle it was often seen as a convergent process with a wide number of initial ideas consistently reducing to a smaller number of products. With the holistic process and the complexity introduced by multiple types of innovation there is a need to accept that the process is more iterative with each phase possibly introducing new invention and therefore being diamond shaped diverging with new invention before converging to a smaller number of outcomes.
Transformational Change – at the enterprise and team/individual levels
Such a step change in approach to innovation is likely to be a considerable challenge for most organisations and require adaption at both the enterprise level and the team/individual level.
At the enterprise level it is key for an organisation to ensure that it creates adequate absorptive capacity to pull through the innovation at all points in the process from invention to monetization.
To do this organisations need to consider whether they foster an innovation friendly environment, whether their enterprise processes, including the innovation processes, are aligned and synchronized with the business and corporate strategy, and whether they have a metrication framework that incentivizes the desired outcomes.
At the team/personal level, for everyone, including functional professionals to play their part in the innovative culture then they need to ensure that they have a mindsets, skillsets and toolsets that are consistent and supportive of the new ways of thinking and working that are key for innovation to flow through the organisation as the way that it does business.
So, what does this mean for us as forward looking professionals?
As senior leaders we have to set an environment of culture, processes and metrics that align, we have to analyse and link resources in a way that drives innovative business solutions, and we have to lead on a wider basis than just our functional focus.
As team leaders we have to be receptive to new ideas, give people space to make new linkages and encourage innovation as a part of the 'day job'.
And as individuals we have to ensure that we are receptive and drive change as the norm, we have to ensure that we equip ourselves with a new blend of skills that are likely to be different from those that we have felt comfortable with in the past, and we have to embrace new toolsets that help us understand the impact of the changes that we propose.
Above all we as professionals need to be bold and step up to the plate in the area of innovation to demonstrate the value that we can add to our businesses through the development of new business models, new relationships, new contracting models, new contract delivery mechanisms, and that we can deliver them as parts of holistic solutions to customer needs.
If we are successful at the above then we will have helped ensure that our organisations are adding to the 'writing on the wall' and not just reading it.
This article is part of the IACCM series on the 'Future of Contracting' which is, through a variety of interviews, survey, articles and other interactions aims to help us set a vision for the future of our profession. Key to this is engendering a debate around the issues raised and therefore your thoughts and views are key.
Innovation and transformation is but one of the challenges we face so join the debate on the IACCM discussion forum https://www.iaccm.com/members/network/forum/
Adrian Furner is the founding partner at Kommercialize, which provides support and advice to organisations in the area of business model architecting, functional innovation competence development and functional-led transformational programme delivery.