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Arne Stjernholm  Danish Initiative for Creativity & Innovation 

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The future of innovation is in our minds. - If we go 50 years back, companies didn't have strategies. Or, of course they had; they lived their strategies in their daily work. But there was no language to name what you were doing until the birth of strategic management in the 60'es. Igor Ansof published 'Corporate Strategy' about diversification in 1965, and Boston Consulting Group launched their popular portfolio matrix a couple of years earlier (the one with cash cows, stars etc.). But until there were such concepts and models to describe strategy making, it was no deliberate management discipline. In other words, you could see the practical results of your strategies, but there was no framework for reflecting and learning about strategy making. "You can't tame, what you can't name".
Innovation unfolds in real life, no doubt. But until the management vocabulary includes 'divergent thinking', 'architectural innovation', 'absorptive capacity' etc. etc., plus a number of models and tools to make the concepts operational, innovation is no deliberate management discipline. Today we face such transition from innovation to innovation management in the corporate world. It's about utilizing what I call the four C's of innovation:

• Innovation takes place in a societal Context, e.g. the market with its turbulence of changes, new competitors, technological development, politics, laws and regulations etc. In this sphere you find many different "schools of thought" both regarding business models and competing technologies, expressed within other companies, within universities, research labs and within the public in general.
• Integrated in the societal Context, the organizational life unfolds as self-organizing patterns of behaviour, or Culture. In this sphere you find competing "schools of thought" within the corporation. It's also the hotbed of emergent innovation.
• A more formal structure is expressed in management systems, processes, competences etc., or the overall Capabilities of the corporation. In this sphere the official choices between the many ideas and thoughts are made and articulated into strategies and plans, based on the established mental models of the organization. In other words, it's the home of planned innovation.
• Finally, there is a possibility for the organization to learn and reflect, to identify the mental models at stake in both the emergent and the planned innovation, and to experiment with alternative ways of seeing the business. I call such activity Conscious leadership of innovation. This sphere is a dynamic "meta-layer" for adaptive innovation management.

To initiate and guide an expedition through these spheres would be an act of conscious innovation management. By doing so, top management not only takes the step from innovation to innovation management, but also makes innovation management a dynamic capability. This development of mind is where the future of innovation begins.

Idea generation - Creativity flowers	Selecting the best ideas - nurturing and developing them	Bringing the solutions to the market
		Copyright ASM 2000

The above picture illustrates the traditional view on Innovation. This view on Innovation as a linear process is true for activities within incremental innovation and product development. However, as we proceed the transition from the Industrial Society to a Knowledge Society, innovation as such changes. Not that incremental innovation and product development will disappear (on the contrary, the incremental improvements secure the business of today) - but new dimensions of Innovation are added to the older.

I would like to discuss two such new dimensions: Radical Innovation and Business Concept Innovation.

What is Radical Innovation?
The nature of Radical Innovation is shown in the figure below. As you can see, Radical Innovation is confronted with uncertainties in two dimensions simultaneously, both technological and market uncertainties. Dealing with Radical Innovation, you don't know for sure, if there's a market for your innovation, and you also have your doubts about which technology to use.
Most companies are comfortable with the horizontal axis of technology development; it follows the logic of Industrialism and Science. The vertical axis of market or application development, however, often seems to be a blind perspective for the technological driven companies, thus making a deliberate way to Radical Innovation difficult.

Let me here give two examples of market innovations:
- The walkman - the invention of the walkman meant no new technologies, only a new application of technology
- The breakthrough of the Internet in the mid-90ties; at that time, the technology was already old - the breakthrough was a result of a convincing constellation of applications.

Why should companies pay special attention to Radical Innovation? - Because U.S. research proves that "radical innovation" and "incremental innovation" are two completely different disciplines and hence must be treated so from a management point-of-view.
Prof. Richard Leifer from the Lally School of Management and Technology, Rensselaer Polytechnic Institute, leads a comprehensive research project titled "The Lally Radical Innovation Project". I will here quote some statements from his book, "Radical Innovation - How mature companies can outsmart upstarts" (Harvard Business School Press, 2000, ISBN 0-87584-903-2):
- "Management of radical innovation projects, however, remains more art than science. Because radical innovation projects are faced with high uncertainty on multiple dimensions, the sophisticated management tools that work so well in the incremental innovation environment are not adequate. Hence, new tools must be added to the traditional project management toolbox".
-"When radical innovation happens, it often occurs in a way that few - inside and outside R&D - really understand. Logically, what is not understood cannot be managed effectively".
-"There is practical value in understanding the patterns in and the differences between the more common incremental innovation projects and the less common radical innovation projects".
-"Becoming lean and mean can make you competitive, and incremental innovation can keep you competitive with current product platforms. But only radical innovation can change the game".

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Business Concept Innovation
If we turn to Business Concept Innovation, Gary Hamel describes this discipline in Leading the Revolution as being both Radical and Systemic. He illustrates this understanding with the diagram below. The vertical axis differentiates incremental and radical innovation, where as the horizontal axis contrasts the component to the system. You could say that innovation focused on component improvement is a heritage from the Industrialism, where everything is separated into controllable parts. The systemic approach looks at the value chain as one system, and systemic innovations are not just improving a single component of the value chain, the whole system is being improved.

I would like to quote some statements from Gary Hamel about Business Concept Innovation:
-"At the heart of industry revolution are daring new business concepts."
-"Business concept innovation will be the defining competitive advantage in the age of revolution. Business concept innovation is the capacity to conceive existing business models in ways that create new value for customers".
- "Industry revolutionaries take the entire business concept, rather than a single product or service, as the starting point for innovation".

(From Gary Hamel: Leading the Revolution, Harvard Business press).

I see this new dimension of Business Concept Innovation as a natural evolution of innovation management. The focus of innovation in pure Industrialism was Product Development. Next step was to focus on the intangible sphere of services and experiences, which often is dealt with in Business Development. The next logical step is the holistic approach to the value system as such, which is the basis of Business Concept Innovation.

Business Concept Innovation is a field, in which I have 4 years of experience from my former job as a Business Developer at Ericsson. So, I have some tools and models, which I would be happy to enlighten you about, if you should be interested in exploring this new land of innovation.

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One of the learning's from my job at Ericsson was to keep in mind the strategic perspective, in which the market and the end users are in focus. I have described some of these learning's in my article "Understanding the End User Drives Strategic Innovation", published in Journal of Innovative Management, vol. 6, no- 2, winter 2000-2001. In the article, I illustrate the method of our Business Development team with this diagram:

I call it a strategic or holistic approach, and I also make the comment that this method in many ways is the opposite or "backwards" process, as compared to the normal technology-driven way of innovating. However, although the two approaches truly have their origin from different business paradigms, I would like to emphasize them as two different entries to the same "garden of innovation". And, I think we should recognize a whole palette of innovation approaches, comparatively to modern understanding of human intelligence as a number of different cognitive talents.
In other words: Strategic Innovation will not replace technology driven innovation or product development, they can fertilize each other - just as Knowledge Society has not replaced Industrialism; Industrialism (and also the former Agricultural economy) still exist, products still need to be produced and developed, but the scope of innovation management is enlarged by adding new dimensions.

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I have tried to illustrate the dimensions of innovation, as seen from the point-of-view of satisfying customer needs, in the needs hierarchy model shown below:

If this description has a core of truth, if offering Meaning is a principal engine of value creation, then innovation of new or better messages becomes a key discipline. New or better stories and visions, based on understanding the customer, become as important as new or better products and technologies.

Most managers will agree that market conditions have changed profoundly since the days of Henry Ford. These changes must be reflected in the discipline of innovation management. So let me finish with two more quotations from Gary Hamel's Leading the Revolution:

- "Our collective selves - our organizations - must also learn to dream. In many organizations there has been a massive failure of collective imagination."
- "The latitude for innovation has never been broader - if only our minds can stretch to it."

Please also read: Strategic Innovation, "To dare to think with the heart" and Organizational Consciousness.