Overview Sadly, Professor Kevin Hindle has recently passed away. As a leading thought leader in Entrepreneurship and Innovation, his work and definitions will live on. "Innovation is the combination of inventive and implementation processes to create new value for defined stakeholders Based on (Hindle 2015)." With the context of innovation in mind, this article deals with: Becoming a High Growth Firm Understanding innovation The innovation gestation period (time from invention discovery to first sales) So, What is Innovation? Throughout my more than fifteen years plus in industry and research, I have noted one common theme. Problems emerge whenever the definition of ‘innovation’ comes into question, a term often used synonymously with ‘ideas’, ‘invention’ ‘novelty’, ‘creativity’ and even ‘change’. Attempts by the Australian Government and industry to understand innovation and a suitable innovation framework have received greater attention in recent years. Despite a collective agreement by SMEs on the importance of new value creation, several further reviews of innovation research by the Australian Government have yet to identify a firm-level innovation implementation framework. The concept of innovation has, to this point, been defined and discussed in various ways. One consistent element of this discussion, however, is a clear global consensus of its significance to organisational performance and growth. In later Modules, we look in detail at how your company’s innovation can lead to improved production, financial and market performance. We train and coach you to set suitable measures in order to increase your company’s competitiveness. Simply put, "innovation is the combination of an inventive process (discovery of new knowledge) and an implementation process (transformation and exploitation of new knowledge) to create new economic or social value for defined stakeholders" (Hindle 2015). If we want to look all scientific, we can display this in a simple equation: Innovation Invention + Implementation. The NewLedge® Approach Rather than commercialisation, we use the term implementation because innovation can also include a business process that may or may not be commercialised. For example, you may implement a production-process innovation that leads to new the creation of new or significantly improved products. You may also ‘license’ that production-process as part of your Purposeful Out-Bound Knowledge Flow. We cover a range of options for you to increase the commercialisation of your innovation and create new revenue streams for your company in Revenue Streams & Pricing Tactics. After you have Assessed the Impact of New Knowledge on your Firm, we will Train and Coach you to evaluate the degree of impact of your Innovation on the market / industry. We may, for example, even be able to show you how to create a new market within an existing industry. We cover Technology Novelty and Market Impact in this article. We explain how your company can increase competitiveness through innovation here. There we discuss measuring performance through production, financial and market outcomes. Now, let's jump into the nitty-gritty of each element. Figure 1: Summary flowchart of key concepts This figure depicts the key concepts in a summary flow chart. Inputs to Innovation Inputs to innovation include internal or organisational-based resources. These are human, social (networks and relationships), physical, financial and other resources. NewLedge® focuses on how you can leverage sets of technology and market-related capabilities. It’s easiest to think of capabilities are bundles or sets of resources. There are other capabilities but combined, bundles of current and new technology and market-related capabilities are formidable sets of resources. Technology-related capabilities enable you to build new products and market-related capabilities enable you to commercialise those new products. Additionally, they are also very difficult for a competitor to imitate - offering you, more often than not, your most valuable sustaining advantages. We cover sustaining advantages in a variety of NewLedge® articles. There is a lot to cover, but don’t worry, the NewLedge® Framework facilitates an easy to follow, methodical approach that means that once you learn how to apply it - it sticks. Then, every time you encounter new knowledge, you know exactly what to do from that point onward. Hence the name, NewLedge®. It all starts with New Knowledge. Let's shift gears and look back to the diagram above (Figure 1). As you can see, external or stakeholder-based resources include external market and commercial sources, public sector sources, General information sources and other firms within the group. We also illustrate how you can access and exploit external resources, allowing you and your firm to add to your internal capabilities and overcome resource shortages. The Inventive Process The discovery of new knowledge may be the result of; A conscientious, research effort; orA serendipitous event, in that it was not consciously sought out. Remember, sources of new knowledge can be internal. Internal sources can be found within design thinking, continuous improvements or what is more commonly referred to now as ‘open innovation’. Firms that actively explore for new knowledge through both formal and informal means (outside of their own firm) open up a whole new range of innovation opportunities. A firm's capacity to innovate can be thought of as the potential of that firm to generate innovative outputs. As such, it is ultimately dependent upon the resources and capabilities that the firm possesses, as these allow it to explore, transform and exploit opportunities. Throughout our program, we provide a wealth of information, oversight and advice on the various capabilities you need to consider. Expanding your Learning Capacity Within our Learning Capacity module, NewLedge clearly outlines a procedure that you and your company can utilise to build upon your level of expertise. Here, you are directed as to how to Enhance and Transform new knowledge into innovation by building these distinctive learning capabilities. I am going to break it down a bit more so we can really be sure of when we have ‘innovation’. Plus, we can work on our understanding of learning capabilities and really nail this definition. The innovation process, therefore, all boils down to learning capacity. Let’s take a look at why. The research behind the NewLedge® Framework found that sample SMEs across vastly different sub-sectors, with varying process-product innovations were observed to all do the following: Explore for new knowledge from a range of internal and external sources; then Transform (or Enhance) newly acquired knowledge into production-process innovation that; delivered measurable process benefits that could then be; Exploited through new or significantly improved products. This learning capacity (explore, enhance-transform and exploit) encapsulates the innovation process for an SME. So, the innovation process is the combination of an exploratory capability, a transformative capability and an exploitive capability to create new economic or social value for defined stakeholders. And yes, innovation remains the combination of an inventive process (exploration & discovery of new knowledge) and an implementation process (transformation and exploitation of new knowledge) to create new economic or social value for defined stakeholders (Hindle 2015). Implementation Process As mentioned earlier, we use the term implementation rather than commercialisation because innovation can include a business process that may or may not be commercialised. It must be noted that the innovation process is iterative, particularly with technological innovations where agile is the dominant project methodology. This flowchart is depicted in linear format for simplicity. In reality, the release of technological innovation is a back-n-forth between inventing and implementing. But we consider the release of the new product to be the real ‘innovation’. Updates are just updates… Again, a firm can implement new knowledge on its own or with external partners. Some of the ways NewLedge® shows you to exploit, or commercialise your innovation with external partners include: Creating spin-outs Licensing or selling intellectual property (IP) Commercialising internally developed technologies in different markets Creating spin-offs out of internal technologies We will cover all of this and more in 'Purposeful Knowledge Flows'. New value The last piece of the innovation puzzle is this, we have to create new value, and somebody has to want it! Plenty of inventions remain exactly that – inventions only. There is a limitless supply of expensive patents that only end up worth the paper they were printed on. Secondly, they often become incredibly novel technologies with no commercial application - namely that there is no product-market fit. _ So, in order to create new value, somebody has to want your innovation. There has to be a demand. We cover this in explicit detail throughout our many articles on Market-related capabilities. When we mention value, what exactly do we mean? Value can be economical or societal. Through helping you to become a high growth firm we will achieve our NewLedge® purpose - and by achieving our purpose, there will be a large economic and societal value created. We train and coach you to Employ the Five Growth Strategies, but more on that later. Executed through NewLedge®-Base, The NewLedge®-Framework measures the value of your innovation in the following way; Your company’s performance and growth. We hope to still be engaged with you and your company post-innovation implementation. If not, with your permission of course, we will follow up with you to ensure your company’s innovation has led to improved production, financial and market performance. "We want to see your company achieve an average annual growth in employees or turnover greater than 20 per cent per annum over a three-year period." COVID-19 has increased our appreciation for a country to be more self-reliant and this presents all SMEs opportunity to ignite their capabilities, add more value onshore and scale-up with increasing global competitiveness. NewLedge® will partner with you to help you achieve this. How long will it take? Innovation gestation period… an interesting, highly debatable topic. Let’s try and get a handle on it by delving into the research that underpins the NewLedge®-Framework. We define the gestation period as the period of time between the initial discovery of new knowledge to first sales, or successful commercialisation. The research behind NewLedge® proved trustworthy across SMEs from manufacturing sub-sectors with vastly different gestation periods. We even conducted research on smaller pharmaceutical companies, and the NewLedge®-Framework still passed rigorous validation. The gestation period for the pharmaceutical SMEs within the MedTech segment included lengthy periods of time (ranging from 7 to 12 years and over) from new knowledge discovery to implementation decision, to actual production-process implementation to production-process benefits to first-sales or commercialisation. Figure 2: Linear flowchart of SME's Innovation process This linear flowchart depicts the SME's innovation process and gestation period with some additional insight into main intervals or milestones. The first milestone in the innovation process is the ‘innovation trigger’. Some common innovation triggers included scientific / technical discovery or legal & regulatory changes. This then leads to exploration for solutions, or new knowledge to solve the problem. In many cases. firms that aren’t proactive in this stage will simply cease to exist. One manufacturer had to find a substitute for led solders. This was triggered by global regulatory changes. If a solution isn’t found, their key customers, such as Kenworth, and caterpillar trucks could not ‘legally’ buy their products any longer. So, you have an innovation trigger… You then explore for new knowledge (internal and external). After a period of time, depending on how advanced your learning capabilities are, you will discover new knowledge. Now comes knowledge transformation. In summary, manufacturing companies have to become proficient at transforming knowledge into new business processes first, before there is product innovation. NewLedge® research found that the first benefits to be realised by the firm were through production-process innovations. Almost all companies involved experienced: Increasing output quality However, we also uncovered ways to: Discover new profitable opportunities through the removal of non-essential layers in the value chain And even ways to: Further, reduce variable costs. Of course, the time taken to realise these benefits and even whether these opportunities are realised at all depends on having the right framework in place, with suitable data capture, measurement and reporting to support management. And all of these outcomes depend on asking the right questions of your data. The NewLedge® Platform is built to enable you to do all this and much more. So now you have improved your business processes and realised measurable benefits through production-process innovation. You may have even uncovered new profitable opportunities through the removal of non-essential layers in the value chain, which we cover in 'Distribution Chanel Management'. The next interval milestone involves continuing to transform new knowledge, this time into a new or significantly improved product (goods & services). We will cover products in the next Topic in this Module. Now our focus shifts to the exploitation of the new product into new, measurable value for our defined stakeholders. How long does this take? Well, how long is a piece of string? Again, there are many mitigating factors, many of which can be controlled with an innovation implementation framework and the right partners to guide you through the process. At NewLedge® we are continuously conducting new research on SMEs who implement innovation using our framework. We then make this data available to you, as easy to understand information. You can use that information to benchmark your company against companies of similar size, age, in similar regions, industries, sub-sectors, with similar products. It is critical to understand the gestation period will differ between sub-sectors. It is also important to understand that the types of resources and collaborative arrangements provided by external partners will differ between sub-sectors. For companies in sectors with long average gestation periods talk to NewLedge®-Partners about longer-term collaborative arrangements with supportive external partners and commitment to long-term strategic innovation roadmaps. For all companies, having insight into the gestation period can help you plan to manage your finances to ensure you are adequately resourced to exploit your innovation. Again, talk to our NewLedge®-Partners about this. They are experts in managing the innovation gestation period across sub-sectors.