The Sophisticated Innovator

The Innovation Value Chain
Rather than reflexively importing innovation best practices, managers should adopt a tailored, end-to-end approach to generating, converting, and diffusing ideas.

by Morten T. Hansen and Julian Birkinshaw

E
Mick Wiggins

XECUTIVES IN LARGE COMPANIES often ask themselves, “Why aren’t we better at innovation?” After all, there is no shortage of sound advice on how to improve: Come up with better ideas. Look outside the company for concepts and partners. Establish different funding mechanisms. Protect the new and radically different businesses from the old. Sharpen the execution. Such strategic counsel, however, is based on the assumption that all organizations face the same obstacles to developing new products, services, or lines of business. In reality, innovation challenges differ from firm to firm, and otherwise commonly followed advice can be wasteful, even harmful, if applied to the wrong situations.

hbr.org

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June 2007

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Harvard Business Review 121

The Sophisticated Innovator

Consider how two different CEOs confronted the innovation challenges facing their companies. When Steve Bennett joined Intuit, the maker of the financial software programs Quicken and QuickBooks, in January 2000, it was a company with lots of ideas – most collected from outside the organization – but little discipline for bringing those ideas to market. “We had a lot of energy focused on learning from customers,” the CEO recalls, “but we were struggling to decide which ideas would have the highest impact.” To fix this, Bennett demanded that clear business objectives be set for ideas in development, and he held people accountable for delivering on them. Intuit is now just as good at executing on ideas as it is at generating them. The company’s
Article at a Glance There is no universal solution for organizations wanting to improve their ability to generate, develop, and disseminate new ideas. Every firm