“Innovation distinguishes between a leader and a follower.” — Steve Jobs.
Do you want your business to grow, expand, and create a more significant impact in the marketplace?
For the business owners we work with, that’s a firm YES.
But how do you grow and expand your business? Leverage innovation within your strategy.
To get your business from where it is today to where you want it in the future, you need to be intentional about how you innovate and how that supports your strategy.
And that’s why in today’s Scoop, I’m sharing a practical framework Craig Dickman discussed on our podcast to help you leverage innovation in your business.
Craig calls it the 3 Levels of Innovation, but it is also popularly known as the three horizons of innovation. (He explicitly states that this is not his original idea)
The 3 Levels of Innovation are:
- Strengthen (your business model)
- Expand (your business model)
- Transform (your business model)
To learn more about the 3 Levels of Innovation, click the button below to listen to the Stop The Vanilla podcast with Craig.
Level 1: Strengthen
Every business has a business model. This level of innovation is about improving it. It’s taking your current processes or ways of getting work done and strengthening them.
This level of innovation usually is not what people think of when it comes to innovating. Some people call Level One innovation continuous improvement. Regardless, Level One innovation is integral to being able to invest in Level Two and Three.
An example of a Level One innovation would be purchasing software to automate a step in a standard operating process. If it helps strengthen your current processes and systems, it’s within Level One innovation.
Level 2: Expand
This innovation level aims to answer the question, “How can I take my business model and expand it?” You still have your core business model, but you may begin taking your products and services into new distribution channels to gain new customers.
It’s about enhancing something you already have to create more value for your customers. Craig uses a great analogy to visualize each level of innovation.
“Level One is in the box. Level Two is opening the box. And Level Three is ignoring the box.”
An example of Level Two innovation could be creating additional products for the customers you already have, reinforcing and expanding the value you bring to the market.
Level 3: Transform
Level Three innovation is what most people think of when they hear the concept of innovation. It’s about exploration into new markets—ignoring the box, as Craig said.
Level Three innovation is about “…fundamentally creating the next level of value” — next level value for you and your current and potential customers.
Craig shares an example of Level Three innovation in his previous company, Breakthrough Fuel:
“Level three for us was when we looked at having all of this data associated with the movement of things. And what we did was create a new data science capability to mine that data to understand the behavior of the marketplace, as it relates to using the movement of things to understand market behavior.”
“So, it wasn’t even tied to fuel at that point. It was tied to understanding market behavior through the movement of things. And that would be an example of transforming and creating a new business model.”
Now, let’s finish with how you can begin implementing this framework into your business.
How to implement the 3 Levels into your organization
To begin gaining value from using this framework, you need to access where you are currently in each of the 3 Levels of Innovation.
Ask yourself what you currently are doing. What strategies are you executing? What solutions or problems are you exploring?
And then begin bucketing these strategies into the 3 Levels. The point of this is to see whether you have balance or not.
But balance does not mean the same amount in each level. Balance is dependent on your vision and your strategy to get there.
For a company in a more innovative space, it may look like this:
- 40% in L1
- 40% in L2
- 20% in L3
But for most organizations, it will look something like this:
- 80% in L1
- 15% in L2
- 5% in L3
A rule of thumb when using this framework is to aim for a 70/20/10 ratio.
- 70% in L1
- 20% in L2
- 10% in L3
We evaluated our strategies across the 3 Levels of Innovation during Stop The Vanilla’s strategy and talent planning process and found it to be a breakthrough thought process.
We saw launching our second book, Stop The Vanilla In your Career and Life, in November 2020 as a Level One Innovation.
We saw the development and launch of the Stop The Vanilla In Your Career and Life Online Course as a Level Two Innovation.
This understanding enabled us to develop key strategies across all 3 Levels of Innovation for 2021.
I want to encourage you to evaluate your strategies across the 3 Levels of Innovation. Figure out a ratio that works best for your organization and get intentional about growing and expanding your business.
The primary way you create the company you want in the future is through innovation delivered by your strategy.
In next week’s Scoop, I’ll tie this all together by discussing how to help your team fit within the 3 Levels of Innovation so your organization can be a leader, not a follower.
Don’t miss it!