The Innovation Deployment Process

Only two months ago we started our journey in the world of innovation, talking about abstract concept about innovation. Then we analyzed the role of design in business with the innovation process and today, we are here for the last step. We went through the bottle neck and now we are in the real world. We are where “design needs business”, and precisely we will talk about the innovation-deployment process. The word process in this case does not emphasize the sequentiality of different steps, but it deals with the connection of different aspects that together contribute to the deployment of an innovation. 

Some of the main concepts

The innovation deployment process finds its declination in the life-cycle concept. This biology concept is applied to the innovation deployment to give the idea of a dynamic process. “Everything that grows, dies”. The most spoken words in innovation classes during this last part of the course. This is the reason why design needs business: the application of rational business steps are vital for reaching a sustainable level of innovation over time avoiding the “death” of the innovation itself.

The product/service life-cycle is a sociological theory that describes the diffusion of innovations among society through the concept of adoption. According to this theory the adoption of innovations could be observed from 3 different levels: micro, meso, and macro.

The micro level is about individuals, describing the stages of the adoption process from first exposure to an innovation to the decision to continue using it. 

The meso level deals with groups of individuals that are differentiated according to the speed with which they adopt an innovation. Precisely there are five adopter categories (innovators, early adopters, early majority, late majority, and laggards), whose distribution over time follows the normal distribution. 

Adoption Curve

As we can see from the picture, a big gap, called “The Chasm”, exists between the early adopters and the early majority. This is a critical point that could be seen as an ulterior filter: if the innovation overcomes The Chasm, it will become a mainstream. 

This moment is critical in the innovation life and to better understand it an analogy with Gladwell’s Tipping point is interesting. In this book, he explains how the World could be seen through social epidemics, where human behaviors are like viruses that when hit the Tipping Point start to expand exponentially among the society. Similarly, if an innovation hits the Tipping Point, it will be able to become a mainstream and start a “positive epidemics”, overcoming The Chasm.

The macro level puts the two previous levels together and relating the adoption to the diffusion of innovations. The latter is mathematically represented by the S-curve, which relates the increasing level of adopters to the saturation of the market share.

The S-Curve and the Adoption Curve

The S curve describes the diffusion of an innovation, but it also clearly shows that “everything that grows dies”, because after the saturation of the market-share is reached, the decline will eventually starts. Then, how is it possible that successful companies like P&G have been on the crest of the wave for so many years?

The answer lies in their ability to continuously innovate, creating and taking S-curve after S-curve. To this regard, the Tipping Point comes as an extremely useful tool. As a matter of fact, the creation of another S-curve has to occur in a very precise moment: when the previous innovation hits the Tipping Point. Even though it could seem illogical, that is the moment where something that used to be unique becomes a main stream and therefore a company has to start innovating again.

S-Curves

Talking about companies, it is interesting to notice that the life-cycle concept fits also with businesses. Precisely, Frank Demmler identifies four stages: Embryonic, Growth, Maturity, and Decline. For us the most important is the Embryonic stage, because it occurs right after the bottle neck has been overcome and it is critical for the entire life of the business, considering that this evolutionary stage sets the business’ basis.

This stage consists of 5 phases (Idea, Feasibility, Verification, Demonstration, and Commercialization), and despite the common belief that sees this stage as a quick one, research showed that it may last up to 14 years. These phases are sequential and they have increasing levels of investments needed, and the goal is to constantly reduce uncertainty to maximize the probability of success, while the venture moves foreword. Even though there is sequentiality, commercialization is the most risky and critical phase requiring the highest investments (Demmler Frank).

Cash needed-risk-phase relationship

At this point, careful readers should have in their minds questions like the followings: “So, we talked about innovations, ventures, life-cycles, and phases; but, what about money? How is it possible to finance a venture and its necessities?”

Well, to answer these questions it is important to identify the connection between the phases and the funding sources. In particular, this relation is driven by the risk and uncertainty perceived of a successful commercialization. Moreover, the most utilized forms of funding could be divided into 2 categories: debt and equity. The former, often in its institutional form (venture loan), is usually concentrated in the last phase while the latter is used in different phases according to its form: Angel Investors, who are private wealthy investors, are focused on the intermediary phases while Venture capitalists, who are investment managers and therefore not owner of the money invested, are usually much more focused on the commercialization phase. 

Types of funding

Enlarging our perspective it is possible to identify many other funding ways. For example, a model that is obtaining increasing recognition and popularity is corporate venturing. According to Kelley Starr, “Corporate venturing is the strategic allocation of a company’s resources to purposefully start new businesses”. More precisely, corporate venturing is internal when new businesses are started within the parent company, while it is external when the parent company directly or indirectly invests in independent start-ups (Starr Kelley, 2007). The advantages of having a parent company supporting innovations are extremely high, especially considering that in this way not only uncertainty and risks are mitigated, but also the funding itself becomes a much less important problem to overcome. On the other hand, the parent company benefits from the innovative waves that output from corporate venturing. If I were an employee in such companies, I would definitely find a trustful environment, where people would feel free to make proposals and work on their ideas. As a matter of fact, we should not forget that We, the People, are the main source for innovations and therefore it is extremely important for a company to give the right amount of freedom for employees to think outside of the box.

Corporate Venturing

An ultimate concept that is involved in the life cycle of both innovations and ventures is the intellectual property (IP). 

In our case, without going into much technical details, it is important to be aware that there are different types of IP and that each one is used according to the subject and to the stage of the innovation. So for example, Trade Secret focuses on the protection of intangible sources of competitive advantage such as ideas, information, and know-how, and it is likely to be used in the early stages of the venture life-cycle. Instead, other types of IP such as Patents, exclude others from the actual manufacturing of tangible compositions, and therefore it is likely to think that they would be utilized when there is the concrete chance to go into the market.

In general I believe it is worthwhile to share a brief reflection about the role of IP in the “West”. Our society puts a lot of emphasis on protecting ideas, justifying this choice in the fact that otherwise the entrepreneurial spirits would be limited by the risk to see innovations stolen or dispossessed. So, considering that innovation is commonly recognized as the engine of economic growth, it becomes extremely important to set the most suitable conditions to let the entrepreneurial spirit bring innovations to life, and IP has a critical role in this process. However, it is important to balance IP with the fact that the best innovations have origin not from a single person, but from a group of people. Therefore to reach a sustainable level of innovation for the future generations it is necessary to have IP laws that do not limit the power of sharing ideas.

       - Michele Bellini -