Taking a walk across the innovation landscape

Recently I have described my concept of an innovation landscape along two axes: the demand for innovation, represented by the problems society is faced with, and the supply of innovation, represented by the ingenious ideas that have the potential to solve those problems. On both axes, there are known and unknown areas, but those areas do not have distinct dividing lines. Rather, they indicate an aspect of time: what is unknown today will likely move into the known sometime in the future. Still, those two axes, with their knowns and unknowns, span an innovation landscape that roughly falls into four quadrants.

Time to take a walk, starting close to our homes, in known territory. The first quadrant is formed by known problems and known ideas. Here, innovation is clearly focused on solving known problems in a different way, but with the already available knowledge, hence novelty is limited to novel linkages. This is the realm of incremental innovation, and it’s the comfort zone of companies. Within their existing business models, they can optimize their processes for maximum efficiency. Institutions are well established to ensure free market access and the rule of law, and to provide an educated, skilled workforce. In terms of innovation, these are the quick wins and low hanging fruit, and everything is well positioned to pick them.

However, when our knowledge repository cannot give us a solution, we’ll move to the second quadrant: known problems and (yet) unknown ideas. Here it is important to obtain more ideas, more knowledge. This can be achieved by gaining access to a broader knowledge base or by creating new knowledge through applied research. Because the problems to be addressed usually fall within existing business models, companies will likely see their solution as business opportunities. Hence, if they can afford, they will make the necessary investment of time and resources. That can occur through cooperation with partners in industry or in academia. As an alternative path, companies might themselves get engaged in applied research for the development of a dedicated solution to a specific problem, or team up with research laboratories to achieve a common goal. Either way, organisations are in place, and so are institutions. Specifically for this second quadrant, higher education and universities are of paramount importance to train and develop the workforce needed for dedicated research.

In these two quadrants we basically feel in control. Institutions and organisations are in place to handle known problems. As a result, structures, processes, procedures, roles and responsibilities are well defined to ensure the quick delivery of efficient solutions. However, this readiness to handle business-as-usual promotes a strong desire to defend the status quo and the established business models – paraphrasing the Shirky Principle:

Every organisation will try to preserve the problem that it was created to solve.

As a consequence, rigidity and inertia undermine flexibility and resilience, making organisations and entire societies susceptible to external shock.

And that will inevitable come, because the problem with the problems is: not all of them are known. Rather, surprise is guaranteed: we will be faced with unknown problems. That’s what characterises the third and fourth quadrants: unknown, unexpected, unacknowledged problems. To tackle them, institutions cannot provide more than just the basic rules, they are too slow to respond and too generic to adjust in a meaningful way. And because such problems are most likely outside the established business models, they are seen as a threat rather than a business opportunity.

But what does that mean? Let’s find out what happens when we enter the third quadrant: unknown problems and known ideas. Being outside established business models, these problem are difficult to tackle for market incumbents. On the contrary, this is where entrepreneurs can shine through vision and agility, swiftly stepping outside the box, finding and occupying a niche that has the potential to disrupt established businesses. Due to their small size, the entrepreneurs face far smaller risks and less cost of failure than big enterprises would. Therefore, this quadrant offers a strategic advantage to the challengers who are willing to experiment and try out new business models.

The fourth quadrant is truly wicked: unknown problems and unknown ideas. Innovation under such conditions needs research: to understand the problem and to develop potential solutions, most likely that will require basic research. It might be necessary to identify new business models to implement a solution within an economic context. And finally, it is highly likely that institutions need to adjusted, which will require fundamental discussion across society. Such a setting requires significant changes in institutions and/or organisations (I’d call that meta-innovation), before the underlying problem can be solved. Take global warming as an example, and consider the creation of CO2 certificates as an institutional change to generate an economic incentive for environmentally friendly behaviour.

This landscape is affected by three agents that each have strengths and weaknesses. Institutions globally define the rules of the game, but they evolve over long periods of time and require considerable effort to adjust. Organisations are efficient in focusing attention and allocating resources and skills to solve well understood problems. But only within their specific region of the landscape, only within their business model. They are well positioned to succeed in the first two quadrants. But they are not agile enough to answer an unexpected call. Entrepreneurs have the necessary vision and agility to change the landscape locally, to cease unforeseen opportunities as and when they arise. They have a strategic advantage in the third quadrant, but they are not strong enough to handle problems at societal scales like in the fourth quadrant.

Only the orchestration of all three agents can ensure that their respective strengths complement each other effectively so that society gets the maximum value out of its innovation system across the entire innovation landscape. Overall, this concept of an innovation landscape describes the obstacles an innovation system must successfully cross. Hence I’ll come back to this testing ground at a later stage to discuss the fitness of innovation systems.

Comments

  1. Ulf,
    I assume you are aware of the Cynefin framework? I think it comes well into what you are describing here. It draws on complex adaptive systems and evolved into a framework I subscribe too. more and more for different discussions around my area of focus, innovation understanding.
    The Cynefin framework has five domains. The first four domains are:
    Simple, in which the relationship between cause and effect is obvious to all, the approach is to Sense – Categorise – Respond and we can apply best practice.
    Complicated, in which the relationship between cause and effect requires analysis or some other form of investigation and/or the application of expert knowledge, the approach is to Sense – Analyze – Respond and we can apply good practice.
    Complex, in which the relationship between cause and effect can only be perceived in retrospect, but not in advance, the approach is to Probe – Sense – Respond and we can sense emergent practice.
    Chaotic, in which there is no relationship between cause and effect at systems level, the approach is to Act – Sense – Respond and we can discover novel practice.

    The fifth domain is Disorder, which is the state of not knowing what type of causality exists, in which state people will revert to their own comfort zone in making a decision. In full use, the Cynefin framework has sub-domains, and the boundary between simple and chaotic is seen as a catastrophic one: complacency leads to failure.

    take a look at David Snowden’s site and blog. Perhaps start here and then go deeper, if you don’t know this :http://cognitive-edge.com/blog/type/cynefin/

    • Dear Paul,
      thanks a lot, that’s a very good and timely reminder. much appreciated.
      I had seen that framework earlier, but not yet considered it to navigate the innovation landscape. That’ll be an interesting exercise, and I’ll take a specific look at the failure dimension.
      Thanks again for the inspiration.
      Regards
      Ulf

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