Wednesday, August 22, 2012

Creating an Innovation Pyramid or Portfolio

In a short essay, professor and innovation thought leader Rosabeth Moss Kanter outlines how every organization needs a portfolio of innovation efforts. She describes a pyramid consisting of a solid base of continuous improvements and incremental innovations, a mid-range that is an incubator for relatively low-risk new opportunities or projects, and a peak outlining future strategic directions that merit investment and risk. 

I have found that her framework resonates widely because it mirrors what individuals think about when building their own financial planning portfolio ... a base of low-risk investments that deliver reliable, yet nominal returns; a mix of higher yielding investments whose returns are less consistent; and a limited number of high-yield, hig-uncertainty stocks or bonds.

Just as individuals have to calibrate their portfolio based on their goals, their appetite for risk, and their age and ability to recover from market declines, so must organizations build an innovation portfolio that appropriate distribute efforts and risk across the three levels of Moss Kanter's pyramid.

Here is how you can you the pyramid/portfolio model to engage colleges in a conversation about advancing innovation in your organization.  You can have the same conversation with yourself about your own innovation capacity and commitments in your work.
  • Distribute the link or copies of the essay and have participants read it.
  • Facilitate an open discussion beginning with the following question: What stands out most for you in this essay?
  • Engage individuals in conversation about the three levels Moss Kanter describes and how your organization works in any or all of them: Are you better at some than others? Are your efforts confined only to one area? If so, why, and what are the consequences of that?
  • Draw a pyramid with three levels as Moss Kanter describes and ask colleagues to note current or recent efforts in your organization for each level. Capture them and discuss!
  • Now discuss applying the pyramid’s distribution of innovation either to (1) a major program or service (i.e., annual meeting), or (2) your organization’s overall innovation culture.
  • Most importantly, identify (1) where you should place a few higher risk-higher return strategic bets and (2) what needs to change in the organization to increase individual capacity and commitment to ongoing incremental improvements throughout the enterprise. 
Associations and other nonprofits would be wise to ensure that their organizations have an agreed upon distribution for the three levels of the pyramid (generally expressed in percentages) and that the appropriate financial planning and policy for use of reserves supports those percentages.  

In other words: What percentage of your growth should come from incremental improvements?  From reasonable-risk new ventures?  From higher risk uncertain opportunities?

It also has been helpful to have a clear set of criteria for evaluating opportunities to make a significant strategic bet so that those decisions are based on sound criteria and data as opposed to individuals' opinions or personal lobbying.

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