People often use the terms innovation and transformation interchangeably. But, as you’ll soon discover, they’re not the same.
Innovation is when you come up with a new idea.
Transformation is when you apply it.
Why is it important to distinguish between these two?
Historically, companies had an R&D department. And because it was called R&D, it was easy to think about R&D as one thing – where new products get built. But R is actually a a very different category than D. Research is where you invest to discover new ideas. This is the innovation part of your business. Development is where you actually build some of those new ideas into a product that you sell to your clients. This is the transformation part of your business.
In financial terms, there was always a big difference between R and D. You had a potential option to capitalize D (because you were making something) whereas R was always an expense. As transformation becomes a base requirement of growth, we need to make sure that we’re transforming effectively. We need to make sure that we’re actually building and deploying (some of) the innovation that we’re creating.
When Do You Use Which?
Innovation is not about dotting every i and crossing every t. It’s about getting the idea right. It’s about creating something where there wasn’t anything before.
Why can’t we…?
Has anyone ever tried…?
What would it look like if we put these two things together?
How could we make that possible?
This is not an exhaustive list of questions. The whole point of innovation is to discover something new.
Transformation is different. With transformation, you are taking a current approach to a problem and finding a better approach. This is where dotting i’s and crossing t’s becomes important. And this is (generally) not a small problem. This is about change management.
Who does the job today?
How do they do it?
When do they do it?
Who do they intersect with?
What are the old inputs? The outputs?
What are the new inputs? The new outputs?
What groups need to be involved in the new approach?
What tools do we no longer need? What new tools do we need now?
The innovation was realizing that you didn’t need a faster horse. The transformation is figuring out how to actually design, manufacture, and sell cars. The point of transformation is to make the new thing available and usable.
Who Does Which?
I agree with people who say that innovation teams need to be small – like 2 pizza teams. When you’re exploring the edge of what’s possible, when you’re making the impossible possible, a small, cross-functional, high-performance team will get you what you need. You need to have someone (or a couple of people) who truly understands the problem. You’ll need a couple of people who really understand the technology. And maybe a couple who are just really good at figuring out crazy questions. And probably someone who can crunch numbers. Data helps everything, even when it comes to sparking creativity. This small team of folks will be focusing figuring out how to change the way problems can be solved.
On the other side, we have transformation. This is about making a cool new idea, but making it usable in today’s world. In general, this is not something that can done by a small team. Your transformation team needs everyone from brilliant technologists (ideally the ones from the innovation team) to project managers. Transformation needs great leadership, and in general, a large team to execute. It’s about getting the process right to make the innovation real.
Sometimes your innovation team becomes your transformation team. But even in this case, your transformation team needs more skills and different kinds. In most cases, you will have a small number (<1 pizza) of people who will move with the idea from the innovation team to the transformation team. And that’s okay, because your innovation team can now move on to solving the next problem.
What Happens if You Don’t Differentiate?
The reason that we innovate and transform is not just to drive growth, it’s to drive profitable growth. Too often, the innovation team is incorrectly staffed or incorrectly integrated or incorrectly tasked. And that wastes money. Often, a lot of money.
If you separate the innovation from the transformation, you will decrease your risk. If you have the appropriate expectations and metrics for both an innovation team and a transformation team, you will improve your likelihood of winning in your market. And you will do it while improving your ROI.
Summary
We need to stop expecting innovation teams to have oversized, short-term results. A good innovation team is going to come up with new ideas to apply in your business or industry. But if you’ve staffed the team properly, they won’t then have the right people to make that real in your business. You need a second step to either build out the idea separately or roll it into another current offering. Either way, it’s going to be less about continued “innovation” (i.e., coming up with new answers) and more about deployment and change management (if not internally, then externally).