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These days, nearly everyone touts the importance of “innovation,” yet most companies struggle with how to replicate it regularly. And the rise of the interconnected and increasingly digitized world has raised even more questions about innovation and agility – questions about how new technologies might be rewriting the rules.
everyday obstacles of using innovation effectively. An understanding of how to support constant innovation systemically through internal processes, culture, methods, and tools is required.
This, along with the incorporation of different approaches, can lead many firms to creating stronger value through innovation.
Clients frequently ask us how to produce meaningful innovation in their businesses. Amidst tremendous choice and change, the questions remain:
“What is innovation? And how can we use it to deliver results?”
Put simply, innovation is the process of creating value for people through new or improved products or services.
And while companies do innovate regularly, many still struggle with the
Organizations should consider introducing a portfolio of innovation approaches to maximize agility across the finding and vetting of opportunities, the scaling of responses, and the optimization of details. Here we will address a few of the common myths that hinder organizations from integrating meaningful and continuous innovation, and recommend a set of approaches for developing your innovation mix.
OUR PERSPECTIVES

It’s worth debunking a few of the common myths about innovation, starting with the idea that innovation only pertains to the introduction of breakthrough or disruptive products or services. This is not always the case.
Incremental innovation (the improvement of current products, services, and processes) can be hugely valuable.
1
Analytics and optimization are often seen as necessary evils rather than opportunities for innovation. Driving value from this approach assumes rapid implementation of changes and a team with a test-and-learn attitude. Aggregating a series of apparently minor A/B an-
A second myth suggests that innovation requires a focus on key, new alytics-driven tweaks in a programmatic way can be shockingly beneficial. It’s a products. But ranges and types of innovation can flow from different types tremendous way to evolve your current business and platform to maximize perof attention to people, business, or technology. Instead of one imagined formance. SapientNitro’s Global Lead of Analytics, Simon James, calls this the scale and a single “object,” we see varieties of scales and differentiation in the
“war of marginal gains.”
For a recent client, our analytics teams identified more than 100 potential focus of innovation: external to internal, product to system, and incremental improvements to digital touchpoints, which we projected to result in a total to disruptive.
With so much innovation present in the innovation process itself, the third
FIGURE 01 myth is that there is a single approach to innovation. As you’ll see, there is actually a range that enables different types of agility to increase the hit rate of innovation at every level.
There is a range of innovation approaches available depending on your objectives.
For some, incremental approaches focused on optimization and platform evolution make sense. For others, labs, pilots, and start-ups are a better approaches. Each has different criteria for planning, scaling, and agility.
Along the range from incremental to breakthrough, we see four main appro- aches to innovation in large organizations (see Figure 1): analytics-driven optimization, hybrid agile, labs and pilots, and the spinout of a (lean) start-up.
Analytics &
Optimization
Evolve
Platform
Hybrid
Agile
Build/Evolve
Platform
Labs &
Pilots
Identify New
Platforms
(Lean)
Start-up
Identify New
Businesses
Breakthrough Incremental
Planning
Scale
Agility
Analytics &
Optimization
Hybrid Agile Labs & Pilots (Lean) Start-up
OUR PERSPECTIVES

uplift of over $46 million. For a separate client, we hypothesized that a persistent shopping cart would improve customer satisfaction and increase conversion.
The brand actively improved this (and several other original recommendations), driving an additional $25 million in annual revenue. These incremental innovations only come if the analytics-driven approach (along with the team) is understood, valued, and included in the innovation portfolio. 2 seeks to deliver the benefits found in agile development, while also permitting the long-term horizons typical in large companies. Unlike more traditional agile (e.g., Scrum), hybrid agile is a better fit for large programs with dependencies across multiple groups.
of hybrid agile allows for the introduction of milestones around each agile delivery release (ADR), which enables reprioritization both within and between
ADRs. Key enhancements were intro- duced within a month of re-launch, increasing conversion and sales while simultaneously minimizing risk for later enhancements.
The bulk of major enhancements or platform builds that companies execute would be best achieved through a hybrid agile approach. Ultimately, these enhancements can flow from different types of innovation, such as identified customer needs, industry improvements in core capabilities, or internal process evolution.
FIGURE 02
Moving from a typical quarterly release schedule to a monthly hybrid agile approach reduces risk and speeds the release of enhancements to the market.
Ultimately, this allows more innovation, sooner.
We often see large organizations with heavy planning processes built around quarterly (or even less frequent) releases. Internal teams are doing more in each release, thereby accumulating risk without value with every unreleased change rather than splitting the risk and value introduced over smaller releases.
Moving to a hybrid agile approach might break a set of what would originally be three releases over eight months to one release per month (see Figure 2).
Typical Release Schedule
Release 1
Release 2
Release 3
For a top retailer, we led a program to redesign across the brand’s digital touchpoints, re-platform its core capabilities, and move the organization from a quarterly release cycle to a monthly hybrid agile model. The “hybrid” part
Release 1 Release 2 Release 3 Release 4 Release 5 Release 6 Release 7 Release 8
Hybrid Agile Release Schedule
OUR PERSPECTIVES

Hunt
3
The next two approaches share similar intents, but assign differing levels of autonomy and responsibility to teams.
The lab approach marries a dedicated team to a distinct physical environment, purpose-built with state-of-the-art tools.
As an organization, a lab understands opportunity spaces in a usefully ambiguous way, organizing explorations around an open-ended hunt with high standards, but loosely defined goals (see Figure 3).
This can be a tricky line to walk, and doing it well requires a willingness to “kill your darlings” before the rabbit hole gets too deep.
FIGURE 03
Lab-based approaches use a traditional top-down methodology. Hypothesis- driven, they are organized around an open-ended hunt for solutions. Unlike the Second Story approach (see Figure 5, right), this traditional approach starts with the hunt, not the technology.
Opportunity
Spaces Context Building Knowledge Artifacts:
Basic Knowledge
Ask
Driven
Self
Directed
Idea
Driven
Discovery
Idea Generation
Test, Learn, Iterate
Package
Executable Idea
Drive Adoption
Knowledge Artifacts:
Learning & Perspectives
OUR PERSPECTIVES
Over the past two years, SapientNitro has invested in a series of labs across five North American offices, building off of capabilities from our acquisition of Second Story.
Second Story was, initially, a small interdisciplinary design studio that was tackling critical areas with explicitly lab-based approaches and obsessed with the intersection of digital and environments – blended physical-digital worlds which were becoming ever more prevalent and not well understood. Needless to say, this is a critical new space for those in retail, hospitality, financial services, and sports.
With the expansion across North
America, Second Story is poised to help a much broader set of our clients innovate.
Second Story’s approach is different because it recognizes that there are few, if any, “best practices” which exist in this new world of blended physical-digital environments. They have deep relationships with display and other pertinent hardware manufacturers, as well as a blend of architects, content strategists, designers, and technologists.
Rather than rigidly trying to solve a business challenge, they leverage an understanding of an organization’s mission, and use this to explore how technology and story can be woven together in an environment to address business problems and provide distinct value. This approach can produce incredible results, but it also forces clients and teams to accept less-bounded problems.
For example, Second Story’s labbased approach for a consumer brand addressed the unique challenge of explaining what technology and benefits exist under the skin of a product in this category.

Rather than creating a big touch screen to walk customers through the product details, Second Story created a series of functional spike solutions based on the latest capabilities found in the lab.
While there were hits and misses, one specific interaction suggested a pattern not just for the specific industry, but also for the future of retail itself.
The chosen solution (see Figure 4) embedded gyroscopic sensors in the products (such as an electronic device or jewelry) on wall shelves and connected them to a screen sitting behind the physical display.
When no products were touched, the display cycled through videos and imagery that activated the space and drew customers in. This not-yet-interactive scene then transformed once a customer picked up the product. As he/she turned the product to inspect different aspects of its construction, corresponding infor- mation was displayed on the screen behind it.
In this way, the actual product for sale – the electronics device or piece of jewelry
– became the primary interface for the interactive experience. This birthed the core in-store design paradigm of
“product as interface,” and we’re seeing the relevance of this notion play out in a variety of categories.
Second Story’s lab-based conditions for success enable this type of innovation to occur.
FIGURE 04
One specific innovation created in the Second Story lab was a product-as- interface proof of concept. In this exam- ple, the shoe controlled a digital interface that highlighted relevant features.
FIGURE 05
Second Story’s lab-based approach starts with technology experimentation – for example laser projection and product scanning – and then links it to an overall experience vision, which ultimately links to a business challenge. This flips the traditional approach of business problem to application on its head, helping to ensure that the chosen vision is achievable, while still being cutting-edge.
Incubation Focused
(“Let’s Experiment with Pico
Projectors on different surfaces:
I bet some will look cool!”)
(“Laser projection looks awesome.
Let’s figure that out.”)
(“We can use these technologies to bring traditional utilitarian e-commerce paradigms into the physical space as a delightful experience!”)
(“This may help us combat Amazon by using one of our greatest strengths: the store.”)
(“Let’s learn how to scan stuff because scanning is a fascinating technology.”)
OUR PERSPECTIVES

Inventing something entirely new is not the only worthwhile output of a lab.
In a retail lab, we examined a start-up that claimed its technology could drive a recommendation engine that
4 would radically increase revenue on our client’s massive e-commerce site.
The lab was able to quickly create a
The last approach is focused on a single opportunity space. Lean start-ups are undertaken with the idea of creating both a business and a product. A large-scale, working proof of concept great example of a successful start-up with the technology to determine if the stemming from a large organization is start-up was everything it said it was or
“giffgaff,” spun out of the UK mobile if it was too good to be true. Unfortutelecom, O2, in 2009. Leaders at 02 nately, it proved to be the latter. The recognized an opportunity for a mobile lab protected a tremendous amount of carrier built on a new business model. resources by being able to evaluate the
Created in late 2009, “giffgaff” is a new platform.
SIM-only mobile network targeting
SapientNitro is involved with various price-sensitive, digital-savvy customers sector-focused client labs that are who avoid traditional networks. The seeking to identify new platforms or network attempts to reward its customers adjacent businesses germane to an for doing much of the work normally industry. We’ve helped retailers explore done by employees – namely, customer retail, insurers explore health, and service and promotion.
1 banks explore financial services, all
This customer-driven business model is with the explicit intent of discovering something O2 could not execute within technology-based platforms or adjacent the company itself given its managebusinesses.The opportunity spaces ment’s focus on incremental growth. and hunts explored have been focused
As a separate entity, however, it had a on the context of the industries definite market impact. And “giffgaff” themselves, combined with the latest continues to be successful. Its financial technology, and applied to the probperformance was helped by a loyal lems and opportunities that we see in customer base and it was named Best people’s behavior.
Telecom Provider in 2014.
2
Most major corporations could use this lean start-up approach when they identify a key opportunity within the market, but don’t see a way to pull it off within their current structure.
1 Wikipedia. "giffgaff." https://en.wikipedia.org/wiki/Giffgaff.
2 Which? Tech Daily. “Why giffgaff is our Best Telecom Services Provider 2014." http://blogs.which.co.uk/technology/ phone-networks/why-giffgaff-is-our-best-telecom-services-provider-which-awards-2014/.
OUR PERSPECTIVES

Venator is SapientNitro’s internal innovation team. It’s a small, highly specialized group that integrates business, technology, user experience, and data science expertise with a core mission to identify, create, and invest in breakthrough innovation. Venator, Latin for “hunter,” focuses on discovering key innovation trends and understanding what impact they will have on the intersection of technology and story.
The group is a driving force for stewarding clients to see around corners toward what’s next.
The inspiration behind Venator came from co-running an innovation center with a client. We realized that a similar model, operating independent of any single client, could act as a vehicle in defining our industry’s future. The team focuses on three main areas:
• Sourcing and assessing innovative start-ups to discover companies that are solving business problems in new and unique ways, but are likely not on the radar of our corporate clients.
• Engaging in research and development activities that employ emerging technologies to explore key topics of interest that are trending and relevant to our clients’ thinking.
• Evaluating potential strategic investments in start-ups that SapientNitro should consider.
The opportunity areas that Venator focuses on include a set of concepts and enablers that run across our business and clients (see Figure 6).
Venator regularly collaborates with leading venture capital firms and the investment community, top universities, and corporate innovation labs. The team will also collaborate internally with other hubs of innovation, such as the
Second Story Labs, Instrumented Intelligence, and client teams.
We see Venator as another key differentiator that reinforces our position as a new breed of agency, breaking boundaries where technology and story meet. With the momentum of our recent recognition as a leader in the Forrester
Innovation Wave, Venator has become more relevant than ever before.
FIGURE 06
Venator focuses on exploring “opportunity spaces” – areas or trends that we believe will have a substantial impact on our digitally-enabled world. Opportunity spaces are on two levels: Concepts, which are high-level categories that combine different emerging technologies toward a solution, and Enablers (the emerging technologies themselves).
Digital Augmentation of Physical Worlds
Participatory
Economy
Advanced
Analytics/Insights
Multisensory
Recognition
Sensors
Virtual Reality
Internet of Things
Real-Time
Experience
Optimization
Machine
Learning
Non-Conventional
Interfaces
Inspiration
& Discovery
Alternative
Distribution
Customizable
Products/Services
Robotics
Cognitive
Science
Wearable
Computing
3-D Printing
Location
Detection

While each approach is capable of attacking opportunities with differing scales, time horizons, and concreteness, there are six innovation principles that can be applied in any context:
PORTFOLIOS NOT PROJECTS
Innovation in large organizations is maximized by understanding which problems align with which approaches.
Consider how your set of opportunities aligns to potential teams and approaches.
MOVE THROUGH THE
INSIGHT MAKE
MEASURE CYCLE QUICKLY
At every level of innovation, the faster a team can move to drive change and then measure its effect, the better it will perform.
BEST PRACTICES
DO NOT DRIVE LEADERSHIP
If your goal is to drive leadership or breakthrough innovation, then perhaps asking your teams or partners to produce best practice reports is not the best solution. Breakthrough innovation comes from focus directed at your customers’ ecosystems and larger journeys, the exploration of new technologies, or the experimentation of new business models. It doesn’t necessarily come from what your competitors are already doing.
INNOVATION MUST
BE PEOPLE-CENTRIC
(EVENTUALLY)
Innovation can be effectively driven by technology and organizational work, but it is ultimately realized by understanding how it solves problems for people.
NOT EVERY TEAM
MEMBER IS READY
OR WILLING TO MOVE
AT LAB PACE
Labs may sound exciting, but they can be tremendously difficult. They require constant reprioritization, and ask team members for a level of rigor and focus that many cannot – or do not wish to – invest.
THINK BEYOND THE
FOUR WALLS OF YOUR
ORGANIZATION
Don’t think that a problem has to be solved only within your team.
The culture of experimenters in the innovation space lends itself to collaboration and idea-sharing.
Creating an innovation network is an important component of creating an internal innovation offering.
OUR PERSPECTIVES

Every day, large organizations struggle with how to maximize innovation, not realizing that their struggle stems primarily from the singularity of mindset and process with which they approach problems and opportunities. What they might need, in fact, is a portfolio of approaches that enables different altitudes of investigation and types of agility.
Each of the four approaches has its benefits in specific scenarios. Focusing
– even obsessing – over analytics and optimization can garner real rewards.
The hybrid agile approach can be used to accelerate delivery of complex enhancements more quickly. Labs and pilots are good ways of exploring new technology platforms and collaborating with start-ups. And the ability to spin out start-ups allows for the quick testing of entirely new business models.
There is no one-size-fits-all to innovation; however, by varying their approaches, companies can maximize the potential hit-rate of their innovation investments.
OUR PERSPECTIVES

Vice President, Strategy and Analysis,
SapientNitro Chicago jcain@sapient.com
Based in Chicago, John plays an active role in experience and innovation research to increase our understanding of consumer behavior. He provides expertise in advanced analytics and data visualization, data modeling, measurement, and reporting that shapes business innovation and design strategy.
Director Experience Strategy,
SapientNitro Chicago zparadis@sapient.com
Zachary is a strategist, professor, and writer obsessed with transforming lives through customer experience. He acts as co-lead for the firm’s Experience Strategy domain, supports the company’s innovation efforts, and teaches at the IIT Institute of Design.
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