Setting Innovation goals and analyzing them can make you more successful. How do you get this right and why should you do it?
I recently interacted with a client that have had high levels of innovation activity ongoing for some time. The activities have yielded lots of very interesting and valuable insights. Lots of ideas and data for how things could be changed for the better in the client’s specific field. How many of the valuable insights have actually lead to actual change? Way fewer than expected. What if there was a way to decrease the failure rate?
Another issue that we often see with clients is a drive to innovate everywhere at the same time. To be fair, this applies extra hard to engineering heavy organizations, but we see it across the board. There is a tendency for many organizations to “over innovate” and essentially reinvent the wheel for the fun of it. At Innovation360 we talk about 7 types of innovation, but there is no need to cram them all into the same project just for fun.
How do we get around lack of understanding and reinventing the wheel? What I will describe is a simple technique to help you focus your innovation efforts and understand how to fulfill your goals!
The technique relies heavily on the theory of constraints tool called the “goal tree” (see for instance here)
The goal tree is simply a logical structure to understand how a particular goal will be fulfilled
A basic goal tree. The logic goes: in order to reach the goal we need critical success factors, in order to fulfill the critical success factors there are necessary conditions
Innovation goals step 1: Understand the goal
The first thing to consider is what the goal is for the suggestion on hand. The goal could for instance be the desired outcome of the project. It could also be the desired performance need of a process or any such variation.
- “The product should turn over $10M and have a gross margin of 60%”
- “The upgrade should be adopted by 60% of our customer base”
We know that goals are important for innovation efforts, and the lack of belief in goals set by the organization is one of the main innovation blockers
A classic goal is derived from finding your growth gap. Using the gap as a starting point it is straightforward to formulate a number of goals for your innovation efforts.
Innovation goals step 2: Understand the critical success factors to reach the goal
Once we understand what our goal is, we can start to think about what is critical to reaching the goal. What needs to exist for the goal to occur. This should be a shortlist of things, ideally 3 to 5 factors. Why 3 to 5? Because it becomes difficult to keep track of more.
So in our example of a product that should turn over $10M and have a 60% gross margin, we would likely need:
- A way to effectively reach our customer with our offering
- The number of customers must be large enough, i.e expected market size
- A believable value proposition
- The sales process to function so that we can close deals
- To be able to produce the product economically and with good enough quality
- To be able to deliver the product to our user
Some of these critical success factors have a dependency. For instance, the sales process probably relies on a believable value proposition. That means we can keep “a believable value proposition” in mind for the next step, but we do not need to treat it as a critical success factor.
Innovation goals step 3: Understand the necessary conditions to reach the goal
Each of the critical success factors will require that certain things fall into place. They require a number of necessary conditions. If we look at our critical success factor “We need the sales process to function”, there are a number of critical success factors that could come up that the critical success factor requires to come true. For instance, it could require:
- A believable value proposition
- A trained and incentivized salesforce
- Sales collaterals and presentations
- Economic analysis of buyer impact
- Conversion rate analysis and adoption of the e-commerce web
The necessary conditions themselves then sometimes have necessary conditions of their own. So a believable value proposition could require an understanding of:
- Buyer personas
- Customers jobs to be done
- Inertia in the buyer organization
For the tree to be practical to work with, it is recommended to cap the necessary condition levels. More detail does not really mean better results. In this case, having a manageable description and good overview is more valuable than an exact breakdown.
Innovation goals step 4: Understand the status of the necessary conditions
You have now constructed what is called a goal tree. This is incredibly useful in itself. It will create an understanding of what is required to succeed. But the real power of the goal tree comes in once you start to understand the status of the critical success factors.
For each necessary condition, you can now say whether it is in place, whether it is a work in progress or whether it is missing. This allows you to focus on the things that are most important.
When I used an innovation goal tree in a scale-up situation it led to a few key takeaways. I understood that we needed a way to calculate the payback for the end customer in order to be successful in our sales effort. I also understood that we needed a specific certification for our product to be able to go to market. Before those two things were in place, we A) Could not sell successfully and B) did not need to consider any investments in scaling up production capability or automation.
Necessary conditions that are fulfilled are marked as green. Necessary conditions that are work in progress are typically orange, and those not in place at all marked in red. Think traffic light.
Understanding the status of your goal tree is hence great for your ability to focus on what is important to move forward, and the ability to visualize the status of progress is invaluable.
Green=fulfilled, Orange=work in progress, Red=unfulfilled
Is what we have set up really an innovation goal?
We are now in a position to understand what we need to understand and create to reach our goal. We have a goal tree showing where things are not in place. I.e the red and orange parts of our tree.
For each of these necessary conditions we can now assess;
- can we solve this with an existing solution in our organization?
- can we solve this with an existing solution from the market?
- Can we solve this with an incremental improvement to an existing solution?
- Can we solve this with a radical new solution?
When the goal is tied to innovation we have got ourselves an innovation goal!
Green=fulfilled, Orange=work in progress using existing solutions, Blue=requires incremental innovation, Purple=requires radical innovation
The connection between innovation and goals
Here, finally, is the connection between the goal and innovation. When we consider innovations in general, there is often a specific innovation that generates value for the end-user. To serve that value to the end-user can require other complementary innovations. We need to understand what these complementary innovations are. If the complimentary innovations needed are radical innovation it can be extremely difficult to actually succeed with the delivery of the value to the end customer.
When we needed payback calculation in the scale-up I was working for, we managed by using existing models. We could get by with slight modifications to fit our case i.e incremental innovation. The certification we needed, on the other hand, actually required radical innovation. We were lucky enough that that was the only necessary condition that required any real radical innovation. Our R&D partner was able to find a material that passed certification and we were off to the races with a two-year delay to the project. With the goal tree in hand, we knew that this was the critical part of the project and we also knew that we could solve the other necessary conditions of the tree with off the shelf or at the most incremental innovations.
New innovations that fail to have the expected impact is a common occurrence. To fulfill expectations, it is critical to understand what is really necessary to reach your goal. Understanding what it takes to fulfill your goal makes it possible to limit the risk of failure! Understanding your goal pinpoints where radical innovation is really needed. Finally, understanding your innovation goals can make sure that you are not innovating where you don’t need to!