Implicit to change is that we are moving towards a future state that is to some degree unknown to us. One of the stumbling blocks in affecting positive change is our lack of a common understanding of the words that we use to communicate. To make matters worse, this is often a stumbling block that we’re blind to. And if we are ignorant to the problem, we are in no position to solve it.

So instead of expressing our dislike for “buzzwords” we should face the problem head-on by defining them. If we don’t do this we rob ourselves of the opportunity to precisely express what we mean.

Buzzwords cease to exist once we collectively define them. So instead of ignoring buzzwords (the Ostrich mentality), let’s turn them into useful terminology that contain specific meaning.

Since I often encounter confusion around the words innovation thesis, innovation strategy, ecosystem, and purpose, I would like to address them in this post. I understand that my definition of these words may differ from yours, but that doesn’t really matter. What matters is that the people that you work and communicate with on a regular basis share the same meaning of the words that you use.

Innovation Thesis (WHERE)

In brief, your innovation thesis is the way you think about the future.

What converging technologies and trends do you see coming together and how will that impact your current business model(s)?

A wider lens would be to look at this through the STEEL framework (Social, Technological, Economic, Environmental and Legal). Using STEEL you can ask what trends and changes are already happening and will likely gain speed as we move into the future. Some changes are step changes, like new legislation, that present windows of opportunity into new markets.

For example, a general innovation thesis for a large insurance company may be that they believe that the convergence of Ai and blockchain will significantly impact their current business model in the coming five years.

A near cousin to the innovation thesis is the investment thesis. For example, the investment thesis of Union Square Ventures guides them to invest in teams that they think can build “Large networks of engaged users, differentiated through user experience, and defensible through network effects.”

The investment thesis will often be supplemented by a set of investment criteria that define the stage of companies that they invest in, what they look for in the teams that they invest, etc.

The reason that innovation thesis and investment thesis differ is because a corporate may choose other ways to achieve their goals besides taking equity in startups.

Suffice to say, the above examples are extremely distilled, and you can find many that are far more detailed.

Innovation Strategy (WHAT)

Once you have established your innovation thesis the next question becomes WHAT must you do to take a leading position in the future that you believe is already on our doorstep? To define that is to define your innovation strategy.

Often people think that a set of long-term measurable goals is the same thing as a strategy. It’s not. For it to become a strategy we also need a clear understanding of how to combine our strengths in a unique way to move us towards those goals.

As such, the innovation strategy becomes that narrow set of options that the company has chosen to put considerable weight behind and actively pursue, while knowingly ignoring other potentially attractive options, simply because they are out of bounds with its innovation thesis.

In short, the innovation strategy are the guiding principles and priorities that you must focus on to ensure that you stand as a winner in the changed landscape of tomorrow.

The Need for Ambidexterity or Balance

So how does the innovation strategy differ from the business strategy or core strategy? Well, to have a chance of standing the test of time and creating a legacy, companies must balance the short-term with the long-term view.

While the core strategy is focused on optimizing the current business model – which by the way includes incremental innovation – your innovation strategy should be focused on creating the company that you strive to become so that you can also thrive in the future.

It’s about searching, experimentation, transformation and new competencies, rather than execution, optimization, defending the status quo, and core competencies.

So, for example, a corporation may choose to focus on building their internal innovation capabilities by revamping their way of searching for and recruiting new talents. Or they may choose to reserve a percentage of their budget for investing into fast-growing startups that are focused on “Ai and blockchain technologies”.

For each heading such as “Intrapreneurship”, “Startup Accelerator”, “Innovation Lab”, “Corporate Venture Capital”, etc. there are many subsets of key activities that a corporation may or may not focus on. The sum of all those activities would be the company’s way to execute on their innovation strategy, also known as “operations” (HOW).

Ecosystem (WHO)

The ecosystem consists of all the entities that your company chooses to engage with to help you to execute on your strategy and that will move you towards a winning position in the landscape as laid out by your innovation thesis.

The more mature a corporation becomes in terms of how to drive innovation, the more they tend to build a balanced portfolio approach to innovation, consisting of numerous bets across different areas.

Some of these areas may be better served by the corporation itself, others entirely by outsourcing to external parties, and some in close collaboration with others. The ecosystem consists of all the players and stakeholders that the corporation is interdependent on in order to execute on its innovation strategy.

The main reasons why ecosystems are imperative for innovation and growth is that you simply can’t be the best at everything. Nevertheless, the business model that you have chosen to focus on may still require you to deliver to your customers things that you are not great at creating. So, ecosystems become the way to do that. This is nothing new. Specialization has been at the core of trade for thousands of years.

Another viewpoint is that innovation tends to happen at the intersection of diverse disciplines and the realization that it must be a statistical probability (even if you are a very large company) that the best talent almost certainly resides outside of your company. And to get access to that talent the organization must be willing to form a web of strong interconnecting nodes, i.e. an ecosystem.

Purpose (WHY)

What about the purpose that drives the organization to seek a leading position in the future as described by the innovation thesis?

Your purpose should be grounded in an understanding of what your values are.

Values are those things that are core to your belief system and who you are as a person.

Values are matters of the heart. You don’t compromise on values and they are not subject to negotiation.

Or to put it differently, if you keep changing your values you never had any to begin with.

A clear set of values communicated through concrete examples is one crucial component that sets great companies apart from the rest. Your values combined with your innovation thesis form the bedrock upon which to build your innovation strategy and ecosystem.

About the author
Andy Cars is the founder and CEO of Lean Ventures International, an innovation strategy firm that helps large companies and organizations to accelerate innovation. Andy has also been contributing to the new ISO-standard for Innovation Management (ISO 56002) that will be published in the beginning of 2019. Terminology will form one part of this new standard.