This document discusses strategic innovation and how companies can succeed at it. It notes that the world is increasingly volatile, uncertain, complex and ambiguous (VUCA), requiring companies to engage in strategic innovation. However, strategic innovation is difficult for companies due to emotional reactions it provokes. The document recommends that companies adopt an iterative approach of building internal and external communities, socializing ideas through storytelling, and testing and learning. It provides examples of companies that have succeeded or struggled with strategic innovation and outlines key actions like embracing discomfort, launching well-constructed innovation journeys, and always questioning and testing to adapt in a VUCA world.

1. Succeeding at Strategic Innovation
Larry Schmitt – CEO The Inovo Group
www.theinovogroup.com
Copyright © 2014 The Inovo Group LLC

2. Outline and Objectives
• What we will cover
– It’s a fast, VUCA world
– The need for strategic
innovations
– The problems with strategic
innovations
– What to do about it
– A view of your possible future
• What you will learn
– Steps you can take to make
strategic innovation a key
competence for your
company
• The premise, the consequence
and the response
– Premise: The world is Volatile
Uncertain Complex Ambiguous
(VUCA) – this requires strategic
innovation
– Consequence: Strategic innovation
is inherently uncomfortable and
causes strong emotional reactions
– Response: A new paradigm of
iteration, building community,
socializing, testing and learning is
needed.
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3. Introduction to The Inovo Group
Founded in 2001
Headquarters in Ann Arbor, MI
Any industry, any technology, any market
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An innovation consulting firm that helps the world’s
top companies succeed at strategic innovation.

4. An Increasingly Fast VUCA World
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5. Transformation is Everywhere
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Doctor-centric -> Patient-centric
Healthcare Energy & Transportation
Molecular & singular -> Photonic & shared
‘IT’
Dumb & clueless -> Smart & informed
Consumers & Retail
Physical & blind -> Mobile & aware

6. The Kodak Story
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2003 – They knew what was happening!
Internal Kodak Strategy presentation
Quicktake digital camera - 1994
1993 – Formed Digital Imaging Business1975 – First digital camera
Steve Stasson - Inventor

7. The Kodak Story
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A Damning Assessment!
• Corporate Culture
• Non-rational expectation of commitment
• Hierarchical firm
• Poor change management
• Insiders resistance
• Change middle to high-level management
Yet they couldn’t / wouldn’t do anything about it!

8. Innovation
Movement
Quality
Movement
Entering the Era of Strategic Innovation
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Adoptionof
CommonPractice
Not Best practices – Next practices

9. What is Strategic Innovation?
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Disruptive
Incremental
Operational Transformational
Newness to
the World
Newness to
the Company
Speculative
Strategic
Sustaining

10. Constant Pressure on the Boundary
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Disruptive
Incremental
Operational Transformational
Newness
to the
World
Newness to the Company
Sustaining
Strategic
External Forces
External Forces

11. Expanding Your Boundary
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Disruptive
Incremental
Operational Transformational
Newness
to the
World
Newness to the Company
When you push your
organization’s boundaries,
does your organization
push back?

12. Being Strategic – Company A
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Aerospace AutomotiveDifferences
• Costs & Volumes
• Functionality
• Industry structure
• Design cycles
• …
A different set of rules

13. Sustaining vs. Strategic Innovations
Sustaining Innovation Properties Strategic Innovation Properties
Clear signals Weak signals
Internal expertise Lack of expertise
Established models & processes Unfamiliar models & processes
Can be done ‘solo’ Requires collaboration (internal & external)
Quantitative decisions Qualitative decisions
High agreement High skepticism
Linear & sequential – concept to reality Non-linear & iterative – concept to reality
Decisions & actions based on analysis Decisions & actions based on emotion
Low VUCA High VUCA
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Reasons for discomfort

14. What Does this Mean for You?
• The Environment
– Diversity & ambiguity of
knowledge sources
– Weak early signals, lack
of evidence
– Knowledge-lean decision
environment
• The Organization
– Qualitative decisions
– Fuzzy milestones
– Uncertainty
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15. It’s not us – Company B
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The two most anti-innovative words
that can be uttered – ‘prove it’
Roger Martin
Data, information, facts
and analysis are not the
complete answer
It’s the ‘feelings’ that kill an
strategic opportunities

16. The Fundamental Barriers
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Emotional responsesDivergent views of the future
Hidden assumptionsPoor mental models
Preconceived notions

17. What to do about it?
Poor mental models Create new and better models
Hidden assumptions Surface assumptions, test & learn
Divergent views of the
future
Develop multiple views, be ready for
any of them
Preconceived notions
Identify them, acknowledge them,
incorporate them
Emotional responses
Tell stories, empathize, make an
emotional connection
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18. How to get there – Be Resilient
• Technophilia – Embracing the transformational power of
fast moving technology
• Situational Empathy – Embracing the transformational
force of rapidly evolving human needs and desires
• Extreme Agility – enhancing resilience to respond to the
unexpected and create the unexpected
• Managed Boundaries – controlling what’s inside and
what’s outside, what’s porous and what’s a barrier,
what’s open and what’s protected.
• Risk Adaptation – changing uncertainty into risk and
embracing risk (and failure)
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19. Healthcare Transformation – Company C
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The Plexus electronics manufacturing model
really translates well into what we are doing
here in terms of how do you take care of
somebody front to back.
You are talking about vertically integrating all
things relative to a very specific focus on
orthopedics.
At Plexus, we paid attention to every cent and
costs were coming down at a tremendous rate.
We are structuring operations so that we make
money on Medicare.
Curt Kubiak – CEO

20. Four Principles
• Iterative Deepening – multiple bites at the apple,
focusing and shaping, contact over time, multiple-
exposure, sub-conscious processing
• Community – contact with both internal and external
adopters and influencers
• Socialization (with both internal and external
community) – letting people connect, understand and
gain insight using storytelling to think and feel
• Purpose built team & project – A journey of discovery
and learning done by a skills team with a definitive
purpose
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21. Iterative Deepening
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22. Build Community
It’s not just Voice-of-the-customer
It’s the Mind-of-the-community™
The community is the people
who have the knowledge,
experience and perspective
that you need to know
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23. Empathize & Socialize
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Thinking
Feeling
Team
External
Experiences
Knowledge
External
Adopters
Internal
Models
StoriesInternal
Adopters

24. Purpose-built Team & Project
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Purpose-built
Team
External Diversity
• Skill & Expertise
• Perspective
• Role & Responsibility
• Compatibility
• Cognitive Style
Internal Diversity
• Demographic
• Functional
• Geographic
• Org. Level
• Connectivity
Purpose-built
Project

25. It’s a Journey
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Into the unknown

26. The Journey’s Objective – Strategic Learning
“The Unknown”
• Demand Knowledge – What's really
wanted and why?
• Design Knowledge – What might be
possible and how?
• Future Insights – What are the non-
obvious, plausible futures?
• Organizational Insights – How
should/could the organization adopt
something new (“say yes”) - and adapt?
• Business Model Knowledge – What are
the “rules of the game”, and how can (or
will) they change?
Opportunity Knowledge – What
should/could be done …incorporating
all of the above
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Business
Model
Knowledge
Future
Knowledge
Design
Knowledge
Demand
Knowledge
Organizational
Knowledge
Opportunity
Knowledge

27. Get the Internal Community Involved
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Internal Community
External Community
Advisory
Support Team
Core Working
Team
Extended
Influence Team

28. Recognize the Power of Storytelling – Company D
Data, analysis, statistics
vs.
Telling stories, creating emotions
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29. Create Effective Working Relationships
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Do it with me
Help me do it
Do it yourself
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30. Outstanding Journeys need Outstanding
Vessels and Crew
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Well constructed – the right organization
Well outfitted – the right processes & methods
Well provisioned – the right software & systems
Well staffed – the right people and skills
The right leadership
The right mission
The right support
Your vessel –
the organizational structure
and the processes, methods
and tools available
Your crew –
the people who are expert in undertaking
journeys and the people who are expert in
exploiting what is discovered

31. But Sometimes Journeys Need to be Halted
Good Reasons*
1. No Pleasant Surprises
2. No Deeper Insights
3. Greater Prospect-
Customer-Client
Engagement Inspires
Little Emotion
4. The opportunity
shrinks or narrows the
more it is shaped
Bad Reasons
1. We’ve never done this
before
2. We’ve tried this before
and it didn’t work
3. We don’t have the
competency
4. We can’t be certain
about the outcome
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*Credit to Michael Schrage

32. What Does Your Company Want?
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Focus on external knowledge
and insights
Well-developed framework,
methods and tools…
…ability to adapt to the
varying situations
Open access to methods that
encourage adoption
Balance demand and design –
technology and markets
Navigation of the critical
internal barriers
Knowing when to stop and
when to push ahead

33. Key Actions for a VUCA World
• Embrace discomfort
– Acknowledge it, understand its sources, address it head on
• Launch well-constructed journeys
– Designed to understand the future, complex system
• Bring along the communities
– Tell stories to connect – be visual
• Always question, always test, always learn
– Keep iterating, give it soak time, abandon when necessary
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34. What Can You do Today?
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Investigate the future
Advocate discomfort
Instigate next practices
Initiate journeys
For more information and analysis of these topics see
the whitepapers available at www.theinovogroup.com
Strategic Innovation
The Thinking-Feeling Organization
Adapting Test & Learn for Internal Startups