Payback

In the realm of commercializing innovations, there exist three primary business models that organizations can adopt: integration, orchestration, and licensing. The selection of the most suitable business model for each innovation is crucial, as it significantly influences the company's ability to realize financial returns. It is essential to understand that no single business model is universally applicable; large enterprises often employ all three models concurrently for various innovation projects.

The choice of business model should be a deliberate decision, subject to regular evaluation and modification if an alternative model promises superior returns.

Companies that opt for the integration model choose to manage all aspects of the innovation process internally, aiming to maintain complete control over every facet of the new development. By adopting this approach, integrators anticipate retaining the majority of the financial benefits, as they bear the entirety of the risks and investments required.

The decision to act as an integrator is typically made under several circumstances: when a company is at the cutting edge of technological advancements and perceives no external contributions as valuable, when the risks associated with external collaboration outweigh the potential benefits, when control over costs and timelines is deemed critical, when the risks are clear and manageable, when the company has a proven track record of success, or when there is skepticism about the commercial viability of the innovation from external parties.

Despite the high costs and complexity associated with integration, both small and large corporations may choose this path. Success as an integrator necessitates several capabilities, including adaptability to changes in the competitive landscape, coordination of multifaceted activities, and adept management of external relationships.

To ensure maximum returns, leaders must structure their organizations to support and foster innovation and generate significant payback. This involves aligning internal components and having leaders who actively participate and make critical decisions that bolster innovation efforts.

The specific steps to align an organization with innovation and generate payback can vary, but generally, it requires coordinating six elements within the business:

1. Individual responsibility: Someone whose primary duty is innovation is crucial for progress. This person must focus on enhancing the organization's innovative capabilities and be accountable for generating payback. 2. Innovation unit: A designated unit within the company should identify, evaluate, and promote valuable innovations. This unit can take the form of an incubator, a "skunk works" team, or an independent operation dedicated to experimenting with new ideas. 3. Employee involvement: Every employee should be encouraged to contribute ideas and suggestions for improvement. Innovation should be seen as part of everyone's job description. 4. Conducive conditions: Creating an environment that supports innovation is essential. This includes providing time for employees to think beyond their immediate responsibilities, space to explore and experiment, opportunities to gain domain knowledge, exposure to new ideas, and personal motivation for greatness. 5. External input: Openness to ideas from partners, suppliers, and academia can enhance internal innovations. Scanning the broader horizon for ideas and integrating them into the organization's efforts is important. 6. Measurement: Tracking innovation performance is vital. Metrics such as sales from new products, patents filed, and revenue growth can be used. Additionally, measuring resources committed to innovation, performance of innovation teams, cash payback, and indirect benefits provides a comprehensive understanding.