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Innovation Organisational design Strategy

Why Diffusion is a Critical Component of the Innovation Value Chain

In the stages of the innovation value chain, from generating ideas to converting them into deliverable activities and finally diffusing them throughout the organisation (and beyond), it is often this last piece where companies fall down. What can we learn from others’ mistakes, to help drive adoption.

01 February 2021 • 3 min read

Photograph: USGS/Unsplash

While often considered taboo, acknowledging and understanding failure is essential if we are to learn from mistakes. To confront this taboo head-on, let’s examine three failures that illustrate fundamental failure modes for innovation:

1) In the early days of the internet, Netscape’s Navigator dominated the web browser market with approximately 90% of the share, propelling their market capitalisation to $3.6 billion just 20 months after the company was founded in 1994.  However, after Microsoft overtook its share of the browser market, Netscape could not generate any further creative product ideas, and the company ultimately disbanded in 2003.

2) Whilst at university in the late ’00s, my brother read online that popcorn had a higher profit margin than cocaine. Keen to get in on the action, he came up with the idea of selling flavoured popcorn, but being a student, he never followed through. A few years later, several brands emerged that had “copied his idea”. My brother’s failure to convert the concept into reality meant that his dreams of becoming the Pablo Escobar of popcorn had vanished. However, our mum was happy with his backup career as an engineer.

3) One of the most well-known examples of failed innovation comes from Kodak. The brand famously invented the first digital cameras but decided not to pursue it further due to fears of cannibalising their film sales. This failure to diffuse the innovation within their organisation or license it to others ultimately led to their dramatic decline.

The process of innovation involves three key stages: idea generation, conversion through to delivery, and diffusion throughout the organisation and its partners. While failing in any one of these value chain steps can be terminal for innovation, the one most commonly overlooked is the diffusion stage.

The innovation value chain posits that the process of innovation involves three key stages: idea generation, conversion through to delivery, and diffusion throughout the organisation and its partners. While failing in any one of these value chain steps can be terminal for innovation, the one most commonly overlooked is the diffusion stage. The tendency to neglect this stage is particularly tragic as it means a reduced reward for the hard work of delivering a creative idea.

Why is it so difficult to get people to adopt good ideas?

Even with evidence of an innovation’s value, people may resist introducing it in their organisation or department. Academic research proposes that three key categories influence the degree to which innovation will diffuse:

  • Innovation: Who benefits from the innovation? How do these benefits compare to the costs?

  • Innovator: How influential are the individuals who are driving adoption? How much risk appetite does the organisation have?

  • Environment: How close are others who have adopted the innovation? What do societal norms say about the acceptability of the innovation?

How influential are the individuals who are driving adoption? How much risk appetite does the organisation have?

These factors and their relative importance will vary depending on the exact situation. A fascinating case study with a complex environment is UK law enforcement. The body comprises 43 regional forces plus numerous other agencies, each with complex, inter-related governance including chief constables, police authorities, and the Home Office. My MBA research in this area used the above factors to show that:

  • The key features of an innovation that determine its rate of diffusion are the proven benefits of the innovation relative to its cost;

  • Barriers to achieving innovation and diffusion are higher within the law enforcement community where appetite for risk is more carefully controlled;

  • The reputation of organisations designed to promote diffusion in a given environment is important; if a diffusion agent is not trusted, then the innovation is unlikely to diffuse.

Documentation can make the business case for adoption by others more straightforward. Collaboration can reduce the ‘distance’ between like-minded innovators, and thus help diffusion.

How can we help encourage people to take up valuable innovations?

There is no silver bullet to improve the likelihood of diffusion, but there are many interventions that can help. In the case of UK law enforcement, these could include:

  • Consistently documenting clear, transparent evidence of the success of an innovation in a given environment. Documentation can make the business case for adoption by others more straightforward.

  • An explicit innovation strategy to help clarify the types of innovation that each organisation is looking to pursue.

  • A greater willingness to share, underpinned by an environment of trusted partnerships and networks. Collaboration can reduce the ‘distance’ between like-minded innovators, and thus help diffusion.

Finding the right glue to stick it all together

The law enforcement case study illustrates the complexity of achieving effective innovation diffusion. But it also provides hope that the problem is not impossible to solve.

A story from 3M vividly illustrates the prize on offer from ensuring effective innovation diffusion. While researching new adhesives, a researcher discovered a new glue initially thought to be too weak to have any practical use. Recognising that this could be useful for others in the future, the discovery was documented and shared across the company. Years later, an employee came across this glue and incorporated it into their new product. That product is now known as the Post-It Note. By 2003, the average professional was receiving an estimated 11 messages on these Post-It Notes each day.

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