**2.2. Beyond product innovation**

change management. Assignments have spanned the public and private sectors, particularly

This paper is informed principally by the team's collective direct experience as consulting

On the topic of innovation, the received wisdom is that around 80% of initiatives fail for one reason or another. What are the reasons? Why is the failure rate so high? Is it inevitably something of a random process for which we have no choice but to tolerate 20% success, or are there more predictable and actionable reasons that organization leaders can do something about?

There has been a huge amount of energy expended around improving the innovation process itself and addressing points such as the importance of a strong customer insight, the clarity of the framing of the "customer job to be done" to inform ideation and design thinking, and the helpful rigor required to frame an innovation as "greenfield" investment proposition to

Our observation is that rather less attention has been given to another significant cause of innovation's low strike rate—the ability of an organization to reshape itself so that it is able to

Amidst all the talk of open innovation, partnering, and outsourcing, there is a concern about the ceding of value and control to third parties, but relatively little talk about how organizations can evolve their core—from the high-performance, dominant model that prevail today and toward what they need to become in the future to retain greater ownership of the value

This chapter explores the challenge of "innovation inside" and proposes a new way of framing a response from leadership. It should be emphasized that the thinking is embryonic and very much an "idea under study" with various pilots currently underway with clients. Therefore,

There was a time when innovation was called new product development (NPD). All that mattered was product performance, with customers making rational choices based upon the attributes and relative performance of a product compared to alternatives. The job of NPD was to create a flow of new products (or more often existing products with new/improved

Most of these new products were borne of the same capabilities and expertise as their predecessors. They were designed by the same teams and produced on the same lines. They were

in the CPG, automotive, and financial services and healthcare sectors.

chain and build in greater responsiveness to customer opportunities.

the author would welcome feedback, challenge, and commentary.

features) that could be demonstrated to be superior and preferable.

**2. The changing nature of innovation**

**2.1. Product innovation**

practitioners and to a lesser extent from academic study.

potential investors.

4 Marketing

effectively execute a new proposition.

Twenty years ago, a car produced by one company could set itself apart from that of a competitor based on a number of physical differences. That is patently no longer the case. Value is found not just in what organizations offer but the experience that surrounds it. What might be called a postindustrial model is emphasizing customer experience as one of the few sustainable sources of competitive differentiation.

How have organizations broken out of the product convergence trap? Some have persevered with product innovation but with ever-diminishing returns. Some have tried to brand their way out of trouble, investing heavily to encourage loyalty and build durable emotional bonds with their customers. Others look beyond product, making the most of new digital technologies to innovate in channel, brand, and customer experience. There has also been a considerable "behind the scene" innovation in process and business model, again enabled by technology. Doblin, an innovation consultancy, estimates that while 80% of effort still goes into product innovation, 80% of returns come from innovation elsewhere in the value chain [2].

Going "beyond product" for innovation does appear to be fertile territory from a customer value perspective, but it brings with it many new executional challenges. How to build or gain access to new capabilities, and how to successfully manage an extended network of partners, suppliers, outsource providers? How to retain sufficient value and control within a more complex network of participants? How to maintain some strategic alignment with core business purpose and values?

A global life insurance business found itself in a position where significant innovation opportunities had been identified in relation to healthcare. Rather than just giving people a lumpsum when they were diagnosed with a serious illness, why not go further and offer support across the entire care pathway, helping select the best qualified doctors and best performing hospitals for treatment, helping organize care and rehabilitation, and even helping them with ongoing healthier lifestyle nudges (that will help to reduce their insurance premiums)? This proposition was highly appealing to customers, particularly in countries with less well-developed healthcare infrastructure and availability.

Most established organizations are centered around the "performance cycle" (**Figure 1**). The performance cycle is what creates value for today. It is where core capabilities and processes reside, with focus on consistency, repeatability, targets, control, and strong governance. If the performance cycle is malfunctioning, resource will be drawn from elsewhere, sometimes

Innovation Inside

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http://dx.doi.org/10.5772/intechopen.74090

For listed companies that need to report quarterly, leadership can become preoccupied with "feeding the monster," fueling, tweaking, and fettling the performance cycle to deliver ever more. The performance cycle attracts the lion's share of talent, resource, and political influence. There is a separate requirement to ponder the future, to provide stimulation and inspiration, and to understand where future value growth is going to come from. Let us call this the innovation cycle (**Figure 2**). The innovation cycle takes into account trends in technology,

sacrificing innovation.

**Figure 1.** Performance Cycle.

**Figure 2.** Innovation Cycle.

This convergence of financial protection with healthcare management might be an exciting and potentially valuable customer proposition, but how do you go about delivering it when your main competence is in actuarial science and product distribution through an agency model? For what healthcare and wellness services would you be a credible provider?

Insurance and healthcare are different sectors that are regulated separately and based on different capabilities. Therefore, it is tempting to respond to such questions with a start point of" we are in the business of insurance, not healthcare" and to preclude the option of organic organization development in favor of partnerships and alliances.

One could have made the same argument about automotive manufacture and distribution compared to vehicle finance and insurance. Yet, over the past 20–30 years, the major automotive brands have successfully evolved their organizations to include sizeable core banking operations.
