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Six Steps for Profitable Innovation

August 14, 2012

My approach to innovation is framed by two paramount topics which figuratively constitute the “book ends” of my thinking: “Value Creation and Value Appropriation”.  As an innovator, I foremost must always think about Creating Value, but even more important, Appropriating Value (i.e., getting a slice of the created value).   In addition to “Value Creation and Value Appropriation”, I focus on assuring “Scarcity” and “Sustainability”.   By assuring Scarcity, I (roughly) mean making sure the created value has certain degree of uniqueness (scarcity assures appropriation).  By Sustainability, I mean, assuring that the scarcity of the newly created value will persist for a period of time that is sufficiently long to attain an economic profit (i.e., attain a positive NPV).   These three guiding principles (Value Creation and Appropriation, Scarcity, and Sustainability) are organized in six logically connected sets of questions that guide me through a systematic evaluation of any business endeavor.  The six sets of questions are as follow: What value is created?  Is the solution for the created value competitive?  Is the operation (i.e., the delivery of the value) efficient? Can the solution be protected? Can scarcity be sustained long enough? Are the operational and asset inefficiencies in the previous five steps managed properly?

Here is a brief description of the six sets of questions:

1. The first set of questions (“Value Created”) guide me toward identifying the “Core Value”, i.e. the most important value associated with my Value Proposition of the innovation (or business endeavor).  This step recognizes that the value proposition of innovation could be composed of aggregation of multiple values; therefore it is important to prioritize and clarify.

2. In the second set of questions I assess the competitiveness of the solutions that deliver the Core Value.  Again, I seek to identify the most important technology or solution that is key in the delivery of the Core value; I call this solution the “Primitive Technology”.

3. In the third step I analyze all the relevant critical business processes that deliver the Primitive Technology (and hence the Core Value).  I make sure that the key steps are subservient and optimized for the delivery of the Core Value and the Primitive Technology. This is the ” Golden Thread”…

4. In the fourth set of questions I analyze the degree to which the key assets identified in the value chain are protected from imitation.

5. In the fifth step I analyze the organization’s ability and commitment to sustain and maintain competitive advantage associated in the Core Value, the Primitive Technology, and the Golden Thread. Typically, I look for evidence of “fastest rate of innovation” in these three areas.

6. In the sixth steps I deal with the countermeasures associated with the weaknesses identified in any of the five cases above and with them management process overseeing all the steps.

When I am done with the process, I would have clearly identified and quantified the value that is created, clearly identified and prioritized the technology that delivers it, clearly identified the processes that are key to its deliver, identified the areas that need to be protected, and identified how to assure a long term competitive advantage.  Furthermore, I would identify how to deal with partners and suppliers and assure my appropriation is protected and uncompromised.

The typical deliverables from the process are circumstantial,  but some of the more common outcomes are as follows:

Decision for innovation/investment  in a specific product or portfolio;

Identification of technology portfolios with greatest future profitability;

Clarification about when to invest internally vs. when to partner vs. when to source, and the conditions and countermeasures that govern the choices;

Identification of the client’s core competencies;

Identification of business areas for key focus (and hence KPIs), etc.

This is a brief description of my approach to innovation.  A systematic and careful progression through these questions will almost assure profitable innovation and growth.

My added value in this process is the ability to efficiently create profitable innovations; my scarcity is the proprietary methodology and personal know-how acquired through repeated use of the process.   I have  lectured and implemented this methodology in many organizations and, time permuting, I might be available to work on your project.

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2 comments

  1. At the conclusion of your assessment process, will your risk analysis results be documented as a qualitative writing or quantitive number crunch?


    • Hi Dana,
      Thank you for your interest.
      If the input is quantitative the output will be too, but if it is qualitative that the output will be most likely qualitative too.



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