During our “Balancing Sustaining and Strategic Innovation” Master Class, Larry Schmitt and Steve Schwartz from The Inovo Group discussed how to balance sustaining and strategic innovation. Other topics of discussion included:
- The difference between exploitation and exploration activities
- Factors that create tension between corporate innovation groups and the business units
- Different opportunities found along the spectrum of strategic and sustaining innovation
- The importance of becoming an ambidextrous organization.
Schmitt and Schwartz are both managing partners at The Inovo Group, a consulting firm that helps technology-driven companies succeed at strategic innovation. Read the highlights or download a PDF of the slide deck.
During the call, Schmitt said that companies must pursue both new, longer-term business opportunities, and efficiency-driven innovations. He compared the process of finding the right balance to a dance. The dance can be choreographed and powerful for companies with a comprehensive strategy, or clumsy and ad-hoc.
According to Schmitt, innovation teams must find an equilibrium between two axises. The first, he says, is exploitation versus exploration activities: “Exploitation is the activities of the company that generate revenue that are all about efficiency…delivering on time, manufacturing efficiently, and are necessary for the survival of the company. The exploration activities are the ones that are building new things. … It is where innovation research and innovation ideas have been constantly developed…”
The second axis, Schmitt says, is the strategic-sustaining spectrum. According to Schmitt, strategic innovations take place over a longer timeline and further away from the core business, while sustaining initiatives take a shorter-term perspective. According to Schmitt, well-balanced teams need both strategic and sustaining innovation.
Using this framework, Schmitt discussed four types of opportunities teams can pursue and the benefits for the company — both in the short and long term.
According to Schmitt, routine opportunities are closely tied to the core business and include ideas that the business unit would pursue if they had greater resources. While Schmitt says corporate innovation groups may tackle these projects early on as quick wins, overtime routine innovations can distract the team from more strategic projects. “Unfortunately, a lot of corporate innovation groups succumb to these requests…but it really should not be their prerogative or mission to actually do these things,” he says. “These fall directly within the business units’ charter.”
The last two opportunities, business unit transform and business unit antagonistic, are further away from the core business. Schmitt says transformational projects may appeal to the business unit in later stages, but business unit colleagues may initially be disinterested: “[Corporate innovators] need to be able to work on [these opportunities] with…no upfront business unit commitment, but a path that permits business unit participation as the opportunity involves.” One example would be a partnership between ExxonMobil and Yoshi, the fuel company, to refill a car’s gas tank while it is parked, removing the need to go to a gas station.
According to Schmitt, antagonistic opportunities could cannibalize the business, disrupt an existing business’ value network, or change a company’s channels to market. Schmitt says that corporate innovation groups should pursue these opportunities to keep their company on the cutting edge.
Schmitt and Schwartz also took questions during the call. One listener asked if innovators can get support for more transformational ideas with a longer timeline, farther away from the core.
“The best situation…is number one, have a CEO that understands…the necessity of having these transformational and disruptive opportunities, understands that they may fail, and understands the need for investment,” Schmitt says. “But even with [C-level] support you still need to manage the development overtime and deal with all the various aspects of how these transformational and disruptive opportunities come to fruition.”
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