On This Page
- Why Organizations Fail at Innovation
- Creative Vision
- What is Innovation?
- Types of Innovation
- The Innovator’s Dilemma
- Foresight and Trends
- Innovation Process
- Measuring Innovation
- Culture of Innovation
- Getting Started with Innovation
The is the ultimate guide to Innovation to help you master creativity, vision, and value creation.
I created this guide to help you quickly see ‘the big picture” of innovation and put the puzzle together.
The irony of innovation is that it’s the lever for your greatest business growth.
And the lack of innovation, is not just a lack of growth, but can end your business or organization.
And the sad reality is that few organizations manage innovation well.
And that’s why so many organizations and leaders fail at innovation.
But it’s a very solvable problem.
3 Key Reasons Why Organizations Fail at Organization
In my experience it’s not that innovation itself is difficult. It comes down to 3 key things:
- Organizations don’t structure for innovation properly.
- Organizations kill innovation through their culture (and it’s the nature of the Innovator’s Dilemma).
- Leaders don’t have shared mental models and vocabulary and understanding of innovation.
To be fair, the last point, innovation has been overloaded and made more complicated than it needs to be.
3 Keys to Better Innovation: Individuals, Teams, and Orgs
Innovation thrives when individuals, teams, and organizations work collaboratively and adopt specific practices to drive better outcomes.
Here’s an explanation of the three keys to better innovation:
- Individuals: Individuals play a critical role in driving innovation. They can become better influencers by developing strong communication and persuasion skills, effectively articulating their ideas, and inspiring others to embrace innovation. They should also learn stakeholder management, understanding the needs and perspectives of different stakeholders and engaging them in the innovation process. By building strong relationships and garnering support, individuals can navigate organizational dynamics and gain the necessary buy-in to drive innovation forward.
- Teams: Innovation is often a team effort. Teams can enhance their innovation capabilities by playing specific roles. The implementer role focuses on executing and implementing innovation initiatives effectively. The champion role involves advocating for and promoting innovative ideas within the organization. The ideator role emphasizes generating creative ideas and solutions. By recognizing and embracing these roles within teams, individuals can contribute their unique strengths and skills to the innovation process, fostering a collaborative and synergistic environment.
- Organizations: Organizations have a crucial role in structuring and supporting innovation. They can establish better innovation structures by implementing dedicated innovation teams or departments, creating cross-functional teams, or setting up innovation labs. By providing resources, funding, and support, organizations empower individuals and teams to explore and experiment with new ideas. Organizations should also foster a culture of learning and experimentation, where failure is viewed as a learning opportunity and continuous improvement is encouraged. This type of culture supports innovation by promoting creativity, risk-taking, and a mindset of adaptability and resilience.
By focusing on these three keys—individuals, teams, and organizations—organizations can create an ecosystem that nurtures and drives better innovation.
When individuals become effective influencers and stakeholder managers, teams assume the appropriate roles, and organizations structure innovation efforts and foster a supportive culture, the likelihood of successful innovation outcomes significantly increases.
To make innovation a very human thing, I like to focus on creative vision. Creative vision is a skill you get better at. All it takes is to see things as they are, and to see how things could be.
Creative vision refers to the ability to imagine and conceptualize novel ideas, solutions, or possibilities that go beyond existing norms or boundaries.
It is the capacity to envision new perspectives, approaches, or outcomes that have not been previously considered.
Creative vision involves tapping into one’s imagination, intuition, and insight to see opportunities or connections that others may overlook. It encompasses the ability to think beyond the constraints of the present and envision a future that is different, innovative, and inspiring.
Creative vision serves as a guiding force in the creative process, providing direction and inspiration to turn imaginative ideas into tangible realities.
Creative Vision is the Choreographer of Innovation
For me, creative vision is the backbone that acts as the choreographer for innovation.
Just as a choreographer directs and orchestrates the movements, steps, and sequences of a dance, creative vision guides and shapes the trajectory of innovation.
It sets the stage for the exploration of new ideas, inspires the creation of novel solutions, and provides a sense of purpose and direction in the innovation process. Creative vision helps to identify opportunities, define goals, and envision the desired outcomes of innovation efforts.
It acts as a guiding force, bringing together diverse perspectives, fostering collaboration, and aligning the efforts of individuals and teams towards a shared vision. Just like a choreographer brings harmony, coordination, and artistic expression to a dance performance, creative vision plays a vital role in orchestrating innovation and driving it towards success.
What is Innovation?
If you want to really leverage the power of innovation, it helps to have a working understanding of what innovation is. There are a lot of ways to define innovation. For simplicity, I define innovation like this:
Innovation is the creation of new value through applied creativity.
Alternatively, it’s simply the introduction of something new.
In a business context, innovation is the adoption and realization of new ideas in the market.
And the value of innovation is the value of the problem you solve.
For more on innovation, see What is Innovation and Why Care?
Types of Innovation
There are several types of innovation that can occur in various aspects of life and business.
Here are some common types:
- Product Innovation: This type of innovation focuses on developing new or improved products or services. It involves introducing novel features, functionalities, or design elements to meet customer needs or preferences. Examples include technological advancements in smartphones, the development of electric vehicles, or the creation of innovative healthcare solutions.
- Process Innovation: Process innovation involves finding new or improved ways of carrying out business operations or production processes. It aims to enhance efficiency, reduce costs, streamline workflows, or improve quality. Examples include implementing automation in manufacturing, adopting lean methodologies in project management, or implementing digital transformation initiatives.
- Business Model Innovation: Business model innovation refers to rethinking and redesigning the fundamental structure and components of a business. It involves creating new revenue streams, changing the value proposition, or exploring alternative distribution channels. Examples include the shift from traditional retail to e-commerce models, the introduction of subscription-based services, or the adoption of platform-based business models.
- Marketing Innovation: Marketing innovation focuses on developing new strategies, techniques, or approaches to promote products or services. It involves finding creative ways to engage customers, differentiate from competitors, or reach new target markets. Examples include viral marketing campaigns, influencer marketing strategies, or the use of social media platforms for brand building.
- Organizational Innovation: Organizational innovation involves implementing new practices, structures, or cultures within an organization to improve performance, collaboration, or adaptability. It may involve changes in leadership styles, work processes, employee engagement initiatives, or the introduction of agile methodologies. Examples include the adoption of flexible work arrangements, creating cross-functional teams, or fostering a culture of experimentation and learning.
- Social Innovation: Social innovation focuses on addressing societal challenges and improving social well-being. It involves developing innovative solutions to tackle issues such as poverty, inequality, healthcare access, environmental sustainability, or education. Examples include the development of affordable renewable energy solutions, social entrepreneurship initiatives, or community-based programs for social empowerment.
These are just a few examples of the types of innovation that can occur. It’s important to note that innovation is not limited to a single category, and often multiple types of innovation can intersect and influence each other to drive transformative changes.
Sustaining vs. Disruptive Innovation
Sustaining innovation and disruptive innovation are two distinct concepts that describe different approaches to innovation within a business or industry. Here’s an explanation of each:
- Sustaining Innovation: Sustaining innovation refers to incremental improvements or advancements made to existing products, services, or processes. It aims to enhance performance, add new features, or address customer feedback while staying within the existing market framework. Sustaining innovation typically focuses on refining and optimizing existing offerings to maintain competitiveness and meet evolving customer needs. It is often driven by continuous improvement, research and development efforts, and customer-driven enhancements. Sustaining innovation helps established companies stay relevant, retain their customer base, and protect their market share.
Example: The release of new smartphone models each year with improved camera features, faster processors, or enhanced battery life represents sustaining innovation. These improvements build upon previous models, maintaining the overall concept and familiarity while delivering incremental upgrades.
- Disruptive Innovation: Disruptive innovation, on the other hand, introduces a new product, service, or business model that disrupts existing markets or industries. It often starts in niche or overlooked segments and gradually gains traction, eventually challenging and reshaping established players and markets. Disruptive innovation typically offers new value propositions, lower costs, or fundamentally different approaches that appeal to new customer segments or unaddressed needs. It often emerges from outside the traditional market leaders and has the potential to create entirely new markets or redefine existing ones.
Example: The advent of digital streaming services, such as Netflix, disrupted the traditional video rental and broadcast television industries. By offering on-demand access to a vast library of content at affordable prices, Netflix fundamentally changed how people consume media, challenging the traditional brick-and-mortar rental stores and traditional TV broadcast models.
Sustaining innovation focuses on incremental improvements to existing products or processes within the current market framework, while disruptive innovation involves introducing entirely new concepts or approaches that disrupt existing markets and create new opportunities.
Both types of innovation are valuable and can drive growth and success, but they require different strategies, mindsets, and approaches to execution.
Business Model Innovation
Business model innovation refers to the process of creating or modifying the fundamental structures, strategies, and components of a business to deliver value to customers, capture new market opportunities, and achieve competitive advantage.
It involves rethinking how a company creates, delivers, and captures value, and can encompass changes to product offerings, revenue streams, distribution channels, customer relationships, and more.
- Business model innovation + sustaining innovation: In the context of sustaining innovation, business model innovation plays a crucial role in ensuring the long-term viability and relevance of a company. As markets evolve, customer needs change, and new technologies emerge, sustaining innovation involves making incremental improvements to existing products, services, and processes. Business model innovation enables companies to find new ways to deliver value to customers, optimize operations, and maintain their competitive edge. By reimagining their business models, companies can adapt to shifting market dynamics, customer preferences, and emerging trends, ensuring continued success and growth.
- Business model innovation +disruptive innovation: On the other hand, disruptive innovation often requires significant changes to the existing business model. Disruptive innovations introduce new products, services, or business models that challenge established players and create new markets or customer segments. Business model innovation is crucial in leveraging disruptive innovations as it allows companies to reimagine how they create and deliver value in these new contexts. It involves embracing new revenue models, redefining customer relationships, and reshaping value chains.
By adopting innovative business models, companies can successfully navigate disruptive changes, seize new growth opportunities, and outpace competitors.
3 Levels of Innovation: Incremental, Radical, and Breakthrough
The three levels of innovation—incremental, radical, and breakthrough—describe different degrees of novelty and impact in the innovation process. Here’s an explanation of each level:
- Incremental Innovation: Incremental innovation refers to small, gradual improvements or advancements made to existing products, services, or processes. It involves making incremental changes, refinements, or optimizations to enhance performance, functionality, or efficiency. Incremental innovation typically focuses on solving existing problems or meeting customer needs more effectively within the existing market context. It is often driven by continuous improvement efforts, customer feedback, and iterative development cycles. While incremental innovations may not result in dramatic shifts or disruptions, they play a crucial role in maintaining competitiveness, increasing productivity, and sustaining growth.
Example: The introduction of a new version of a smartphone with improved camera resolution or battery life represents incremental innovation. These improvements build upon the existing product and aim to enhance specific features based on customer preferences and technological advancements.
- Radical Innovation: Radical innovation involves significant departures from existing products, services, or processes. It introduces substantial changes or novel approaches that create a noticeable shift in the market or industry. Radical innovation aims to deliver substantial improvements, create new value propositions, or address unmet needs through transformative changes. It often involves rethinking established assumptions, technologies, or business models. Radical innovation can disrupt markets, challenge existing players, and create new opportunities or market segments.
Example: The development of electric vehicles (EVs) represents a radical innovation in the automotive industry. EVs offer a fundamentally different propulsion system, relying on electric motors and batteries instead of internal combustion engines. This innovation has the potential to transform the transportation sector, reduce reliance on fossil fuels, and address environmental concerns.
- Breakthrough Innovation: Breakthrough innovation represents the highest level of novelty and impact. It involves revolutionary advancements, paradigm shifts, or game-changing discoveries that significantly disrupt industries, create entirely new markets, or solve complex problems in transformative ways. Breakthrough innovations often involve significant risks, require substantial investment, and challenge conventional wisdom. They push the boundaries of what is currently possible and have the potential to reshape entire industries or society.
Example: The development of the internet and its widespread adoption can be considered a breakthrough innovation. It revolutionized communication, information sharing, commerce, and countless other aspects of daily life, opening up new possibilities and transforming various industries.
The three levels of innovation—incremental, radical, and breakthrough—represent different degrees of novelty and impact.
While incremental innovation focuses on gradual improvements, radical innovation introduces significant changes, and breakthrough innovation represents transformative breakthroughs that reshape industries and society.
Each level plays a crucial role in driving progress and growth, and organizations often need a mix of these innovation types to thrive in a rapidly evolving world.
The Innovation Ambition Matrix: Core, Adjacent, and Transformational
The Innovation Ambition Matrix, as described by Bansi Nagji and Geoff Tuff, provides a framework for categorizing and managing different types of innovation initiatives within a company. The matrix highlights three distinct categories of innovation:
- Core Innovation: Core Innovation involves making incremental changes and improvements to existing products, processes, or markets. It focuses on leveraging the company’s current assets and capabilities to drive continuous improvement and maintain competitiveness. Core Innovation aims to enhance existing offerings, such as product features, packaging, or service convenience, to meet evolving customer needs and preferences. While core innovations may provide steady growth, relying solely on them can lead to product proliferation and a stagnant revenue pie.
- Adjacent Innovation: Adjacent Innovation involves leveraging the company’s existing strengths and capabilities to enter new markets or create new applications for its offerings. It requires deep insights into customer needs, market trends, and competitive dynamics. By identifying adjacent opportunities, companies can expand their reach and generate new revenue streams while still building upon their core competencies. An example is Proctor & Gamble’s Swiffer, which took the existing customer need for a long-handled mop and introduced a new technique to serve a different customer set.
- Transformational Innovation: Transformational Innovation aims to create entirely new products, services, or business models that disrupt existing markets or even create new markets altogether. It involves venturing into uncharted territory, exploring unfamiliar assets, and addressing emerging customer needs. Transformational innovations have the potential to make significant breakthroughs and generate substantial growth. Examples like iTunes, the Tata Nano, and the Starbucks in-store experience demonstrate the transformative impact these innovations can have on industries and customer experiences.
By recognizing and managing innovation initiatives across these three categories, companies can balance their short-term goals with long-term vision.
While Core Innovation ensures ongoing improvement, Adjacent Innovation helps expand into new markets, and Transformational Innovation drives disruptive change and growth.
The Innovation Ambition Matrix serves as a strategic tool for organizations to allocate resources effectively and foster a balanced innovation portfolio.
10%, 20%, and 70% Return on Innovation Investment
How much impact does each type of innovation investment actually have on your long-term growth?
Here’s what Bansi Nagji and Geoff Tuff discovered from their research on innovation investment:
- Core Innovation: Core innovation efforts typically contribute 10% of the long-term, cumulative return on innovation investment.
- Adjacent initiatives: Adjacent initiatives contribute 20%.
- Transformational Innovation: Transformational efforts contribute 70%.
The Innovator’s Dilemma
The Innovator’s Dilemma, coined by Clayton Christensen, describes the challenge faced by successful companies when dealing with disruptive innovations. Established companies often focus on improving their existing products for their current customers, known as sustaining innovation.
However, they can overlook or underestimate simpler, cheaper, and emerging disruptive innovations that target niche markets or underserved customer segments. Over time, these disruptive innovations can improve and gain a larger market share, posing a threat to established companies.
For example, consider the case of digital cameras. Kodak, a leading film-based photography company, was successful in its traditional film business.
However, it failed to recognize the potential of digital cameras, which started as lower-quality alternatives appealing to a small group of early adopters.
As digital camera technology improved, it eventually disrupted the film photography market, causing Kodak to struggle to adapt and losing its dominant position.
To overcome the Innovator’s Dilemma, companies must be willing to disrupt their own business models and embrace emerging technologies or markets.
They should actively explore new customer segments, experiment with different approaches, and be open to taking calculated risks.
By staying alert to disruptive innovations and being willing to adapt, companies can avoid being overtaken by smaller, innovative competitors.
The Innovator’s Dilemma refers to the challenge faced by successful companies when disruptive innovations arise. By understanding this dilemma, companies can proactively adapt their strategies to stay ahead of the competition and avoid being disrupted.
Addressing the Innovator’s Dilemma
Here are a few simple strategies for addressing the Innovator’s Dilemma:
- McKinsey 3 Horizon Framework: The McKinsey 3 Horizon Framework empowers companies to navigate the Innovator’s Dilemma by balancing immediate performance and long-term growth through strategic focus on core improvements, adjacent opportunities, and disruptive innovations.
- The 3 Box Solution: The 3 Box Solution presents a transformative approach to overcome the Innovator’s Dilemma, urging organizations to effectively manage the present, selectively abandon the past, and proactively create the future, ensuring continued relevance in a rapidly evolving market.
- Pivot to the Future: Pivot to the Future inspires companies to break free from the shackles of the Innovator’s Dilemma by embracing disruption, adopting emerging technologies, and exploring new markets. It champions a forward-thinking mindset, enabling organizations to drive future growth and thrive amidst shifting value creation.
McKinsey 3 Horizon Framework
The McKinsey 3 Horizon Framework provides a structured approach for organizations to manage innovation and address the Innovator’s Dilemma.
By simultaneously investing in core improvements, adjacent opportunities, and disruptive innovations, companies can adapt to changing market dynamics, maintain competitiveness, and proactively shape their future.
The McKinsey 3 Horizon Framework is a strategic model that helps organizations manage their innovation efforts and balance short-term performance with long-term growth. It provides a structured approach to addressing the Innovator’s Dilemma by encouraging companies to simultaneously focus on incremental improvements (Horizon 1), adjacent opportunities (Horizon 2), and disruptive or transformational innovations (Horizon 3).
- Horizon 1: Horizon 1 represents the core business and focuses on optimizing existing products, services, and processes. It involves incremental improvements, cost reduction efforts, and enhancing customer experience within the current market and business model. Horizon 1 initiatives are vital for sustaining the current business and meeting the demands of existing customers. The Innovator’s Dilemma is addressed by continuously investing in and refining the core business while remaining aware of disruptive threats and emerging customer needs.
- Horizon 2: Horizon 2 represents adjacent opportunities that extend beyond the core business. It involves exploring new markets, customer segments, or technologies that are closely related to the organization’s existing capabilities. Horizon 2 initiatives aim to capture growth from adjacent spaces and leverage existing resources while addressing emerging customer needs. By proactively pursuing adjacent opportunities, companies can navigate the Innovator’s Dilemma by expanding into new markets before disruptive players gain a foothold.
- Horizon 3: Horizon 3 represents disruptive or transformational innovations that have the potential to reshape industries or create entirely new markets. It involves exploring emerging technologies, business models, or customer needs that are not directly aligned with the organization’s current operations. Horizon 3 initiatives require taking calculated risks, investing in new capabilities, and experimenting with novel approaches. By actively pursuing Horizon 3 opportunities, companies can disrupt themselves before others do and stay ahead of the Innovator’s Dilemma.
The McKinsey 3 Horizon Framework addresses the Innovator’s Dilemma by acknowledging that companies must simultaneously focus on multiple time horizons. It recognizes that a sole emphasis on Horizon 1 (sustaining innovations) can lead to complacency and vulnerability to disruption.
By allocating resources and attention across all three horizons, organizations can balance short-term performance with long-term growth and remain competitive.
Furthermore, the framework encourages organizations to focus on shifts in value rather than being solely time-driven. It emphasizes understanding customer needs, market dynamics, and technological advancements that drive changes in value creation.
By staying attuned to these shifts, companies can identify emerging opportunities and make strategic decisions to avoid getting caught off guard by disruptive forces.
The 3 Box Solution
The 3 Box Solution is a framework developed by Vijay Govindarajan that helps organizations navigate the Innovator’s Dilemma and effectively manage their innovation efforts. It involves dividing the organization’s activities into three boxes: Box 1 (Manage the Present), Box 2 (Selectively Abandon the Past), and Box 3 (Create the Future).
- Box 1: Manage the Present: Box 1 focuses on the current operations and core business of the organization. It involves managing and optimizing existing products, services, processes, and customer relationships. In this box, the goal is to ensure operational efficiency, meet current customer needs, and deliver consistent performance. Examples of Box 1 activities include incremental improvements to existing products, cost-cutting measures, and process optimization.
Example: For example, a smartphone company investing in research and development to enhance the camera features of their existing product line would be an example of Box 1 activity. They are managing the present by improving and refining their current offerings.
- Box 2: Selectively Abandon the Past: Box 2 is about selectively letting go of outdated practices, business models, and products. It involves identifying and phasing out elements that are no longer delivering value or hindering future growth. By abandoning the past, organizations create space and resources for new opportunities. This box requires a critical evaluation of legacy processes and a willingness to embrace change.
Example: For example, when digital cameras emerged, Kodak was a leading film-based photography company. However, Kodak failed to adapt to the digital revolution, leading to their decline. Their reluctance to abandon the past—the film-based business model—ultimately hindered their ability to seize the opportunities presented by digital photography.
- Box 3: Create the Future: Box 3 is all about creating the future of the organization. It involves exploring and investing in disruptive innovations, new business models, and emerging markets. In this box, organizations focus on breakthrough ideas and concepts that have the potential to reshape the industry and drive long-term growth. It requires a forward-thinking mindset, experimentation, and a willingness to take risks.
Example: For example, Amazon’s foray into cloud computing with Amazon Web Services (AWS) exemplifies Box 3 activity. At the time, Amazon was primarily known as an e-commerce company, but they saw the potential of cloud services and decided to create the future by launching AWS, which has become a major revenue generator and industry-leading platform.
The 3 Box Solution provides a structured framework for organizations to balance their focus on managing the present, selectively abandoning the past, and creating the future.
By effectively managing all three boxes, organizations can navigate the Innovator’s Dilemma and foster a culture of innovation and adaptability.
Pivot to the Future
In today’s constantly changing business landscape, disruption is a common occurrence across industries. To navigate ongoing marketplace disruptions successfully, the key is to become a disruptor rather than being disrupted.
This requires the ability to pivot repeatedly and strategically.
The Pivot to the Future strategy emphasizes the importance of constant reinvention and the ability to make wise pivots from one opportunity to the next. It involves systematically balancing and rebalancing investments in the Old, the Now, and the New.
Balancing and rebalancing investments in the Old, the Now, and the New refers to the strategic allocation of resources and focus across three key areas of an organization’s activities. Here’s an explanation of each component:
- The Old: “The Old” represents the existing core business operations and assets of the organization. It encompasses the products, services, processes, and customer relationships that have been the foundation of the company’s success. Balancing investments in the Old involves allocating resources to maintain and optimize these existing operations, ensuring their continued competitiveness and profitability.
For example, a technology company that has a successful line of products in the market would continue to invest in research and development, production, and marketing efforts to enhance and sustain the existing product line.
- The Now: “The Now” refers to the current market dynamics and immediate opportunities that are emerging. It involves investing resources in initiatives and projects that address the present needs and challenges of the market. This could include incremental improvements, market expansion, or addressing evolving customer preferences.
Continuing with the previous example, the technology company might allocate resources to improve customer support services, enhance user experience, or optimize distribution channels to better serve the current market demands.
- The New: “The New” represents future-focused initiatives and disruptive innovations that have the potential to create new markets, products, or business models. It involves investing in exploring and developing breakthrough ideas, emerging technologies, and untapped customer segments. The New represents the organization’s proactive approach to staying ahead of the curve and driving long-term growth.
In our technology company example, allocating resources to research and development for new technologies, exploring partnerships or acquisitions in emerging markets, or investing in a startup incubator to foster innovative ideas would align with the focus on The New.
The key is to strike a balance between these three dimensions—Old, Now, and New—based on the organization’s strategic goals and the evolving market landscape.
The allocation of resources should be periodically reassessed and rebalanced to ensure that the organization stays competitive in the present, actively pursues future opportunities, and effectively manages its core operations.
This approach helps organizations address the Innovator’s Dilemma by maintaining the current business, seizing immediate opportunities, and investing in future innovation to sustain long-term growth.
The Pivot to the Future strategy focuses on two main aspects:
- Release trapped value: First, releasing trapped value involves continuously finding new and improved ways to unlock the value within the current business model and refocusing the business around the right combination of existing and new assets.
- Keep making wise pivots: Second, making wise pivots again and again requires ongoing reinvention and multiple pivots to adapt to unpredictable markets.
By adopting the Pivot to the Future approach, companies can navigate disruptive forces effectively, unlock hidden value, and position themselves for long-term growth and leadership in evolving markets.
Another approach to address the Innovator’s Dilemma is to focus on continuous innovation through an ambidextrous organization.
An ambidextrous organization is one that can effectively manage and balance both exploration and exploitation activities simultaneously.
Exploration refers to pursuing new opportunities, experimenting, and fostering innovation, while exploitation involves optimizing existing resources and capabilities for current operations and incremental improvements.
Addressing the Innovator’s Dilemma requires the ability to navigate between sustaining the current business and exploring disruptive opportunities.
An ambidextrous organization can help tackle this dilemma by creating a structure and culture that supports both types of activities.
Here are some key aspects of setting up an ambidextrous organization:
- Separate Structures: Establish distinct units or teams dedicated to exploration and exploitation. The exploration unit should have autonomy, freedom to experiment, and a high tolerance for failure. The exploitation unit should focus on operational excellence and efficiency. This separation allows each unit to pursue its objectives without the conflicts and resource constraints that often arise when balancing different types of activities.
- Leadership Support: Leadership plays a crucial role in fostering an ambidextrous organization. They should communicate the importance of both exploration and exploitation, allocate resources accordingly, and create an environment that encourages risk-taking, learning, and collaboration across units.
- Resource Allocation: Allocate resources and investments strategically between exploration and exploitation activities. While the exploitation unit typically receives a larger share of resources for the core business, the exploration unit should also receive adequate resources to pursue disruptive opportunities. It requires a balanced approach that considers the long-term impact of both activities.
- Flexibility and Learning: Foster a culture of adaptability, continuous learning, and flexibility. Encourage employees to embrace change, experiment, and share knowledge across units. Provide mechanisms for learning from both successes and failures to drive future innovation.
- Cross-Unit Collaboration: Encourage collaboration and knowledge sharing between the exploration and exploitation units. Facilitate communication channels, cross-pollination of ideas, and partnerships to leverage the strengths and insights of each unit.
By setting up an ambidextrous organization, companies can effectively address the Innovator’s Dilemma.
They can sustain and optimize their core business through exploitation while simultaneously exploring disruptive innovations and new opportunities.
This approach helps organizations adapt to market changes, foster a culture of innovation, and stay ahead in an ever-evolving business landscape.
What is Strategic Foresight?
Strategic foresight is an approach that helps organizations anticipate and prepare for the future by systematically exploring and analyzing trends, uncertainties, and potential disruptions.
It involves a structured and forward-looking mindset that goes beyond traditional strategic planning to understand and navigate emerging opportunities and challenges.
Strategic foresight involves a range of methods and tools to explore multiple plausible future scenarios, understand the drivers of change, and identify potential risks and opportunities. It goes beyond predicting the future and focuses on developing strategic insights and capabilities to shape the future.
Key elements of strategic foresight include:
- Environmental Scanning: Organizations actively gather and analyze information about trends, technologies, social dynamics, market shifts, and other relevant factors to gain a holistic view of the external environment.
- Scenario Planning: Organizations develop and analyze multiple future scenarios that capture different potential outcomes and their implications. This allows decision-makers to consider a range of possibilities and make more informed strategic choices.
- Weak Signal Analysis: Weak signals are early indicators of emerging trends, disruptions, or changes that are not yet widely recognized. Organizations use weak signal analysis to detect and interpret these signals, identify potential future developments, and take early action.
- Future Thinking: Organizations encourage a forward-thinking culture that encourages creativity, innovation, and an open mindset to explore future possibilities. They actively engage in discussions and debates about the future to challenge assumptions, stimulate new ideas, and foster strategic insights.
- Adaptive Strategy: Strategic foresight supports an adaptive approach to strategy, where organizations are agile and responsive to changing conditions. It involves continuously monitoring and reassessing the environment, regularly updating strategies, and being prepared to pivot when needed.
Strategic foresight is valuable for organizations as it helps them anticipate and shape the future, mitigate risks, seize emerging opportunities, and develop a competitive advantage.
By adopting a forward-looking mindset and integrating strategic foresight practices into their decision-making processes, organizations can navigate uncertainty and position themselves for long-term success.
For more on strategic foresight, see:
Trend scouting is closely related to strategic foresight as it is an essential component of the overall process.
Trend scouting involves actively monitoring and identifying emerging trends, patterns, and shifts in various domains such as technology, consumer behavior, social dynamics, and industry landscapes.
Here’s how trend scouting relates to strategic foresight:
- Early Detection of Signals: Trend scouting helps organizations detect early signals of potential future changes and disruptions. By systematically scanning the external environment, organizations can identify emerging trends and weak signals that may have significant implications for their industry or market. These signals serve as inputs for strategic foresight activities.
- Insight Generation: Trend scouting provides valuable insights and data that contribute to the generation of future scenarios and strategic insights. It helps organizations understand the drivers of change, assess the potential impact of trends, and identify new opportunities and risks. These insights inform the strategic foresight process by helping decision-makers gain a holistic view of the future landscape.
- Scenario Planning: Trend scouting is instrumental in developing robust scenarios within the strategic foresight process. By identifying relevant trends, organizations can consider a range of plausible future scenarios and explore their potential implications. Trend scouting enables organizations to create diverse and well-informed scenarios that capture different possible futures.
- Strategic Decision-Making: The information and insights obtained through trend scouting inform strategic decision-making within the strategic foresight process. By understanding emerging trends and shifts, organizations can make informed choices about resource allocation, investment priorities, market positioning, and innovation initiatives. Trend scouting helps decision-makers align their strategies with the anticipated future landscape.
- Agility and Adaptability: Trend scouting enhances an organization’s agility and adaptability. By proactively monitoring trends, organizations can anticipate changes and prepare for them in advance. It enables organizations to respond swiftly to emerging opportunities and challenges, making adjustments to their strategies and operations as needed.
Trend scouting plays a crucial role in the strategic foresight process. It provides valuable insights, early detection of signals, and informs the development of future scenarios. By integrating trend scouting into their strategic foresight practices, organizations can gain a competitive advantage by being better prepared for future uncertainties and positioning themselves strategically in a rapidly changing business environment.
An innovation process is a systematic approach that guides organizations through the stages of generating, developing, implementing, and managing new ideas and solutions.
It provides a structured framework to transform creative ideas into tangible innovations that deliver value to customers and drive business growth.
An example of an innovation process can be summarized in several stages, such as the following:
- Ideation: The process begins with generating a wide range of ideas. This can be done through brainstorming sessions, idea challenges, customer insights, market research, or collaboration with cross-functional teams. The goal is to generate a diverse pool of potential innovation concepts.
- Idea Selection: Once ideas are generated, they need to be evaluated and filtered to identify the most promising ones. This involves assessing their feasibility, alignment with strategic objectives, potential impact, and market viability. Ideas can be further refined or combined to create stronger concepts.
- Concept Development: The selected ideas are then developed into more detailed concepts. This includes conducting feasibility studies, prototyping, conducting market tests, and gathering feedback from stakeholders. The goal is to iterate and refine the concepts to ensure their practicality and desirability.
- Resource Allocation: At this stage, resources such as funding, personnel, and technology are allocated to support the development and implementation of the chosen innovation concepts. This includes securing budgetary approvals, forming dedicated teams, and acquiring necessary resources.
- Implementation: The selected concepts are translated into action through detailed planning, project management, and execution. This involves designing and refining the product or service, setting up production or delivery processes, establishing marketing and sales strategies, and addressing any regulatory or legal requirements.
- Testing and Validation: The implemented innovation is tested, evaluated, and validated through pilot programs, prototypes, user testing, and market trials. Feedback is collected, and necessary adjustments are made to ensure the innovation meets customer needs, performs as intended, and delivers the expected value.
- Launch and Scaling: After successful testing and validation, the innovation is officially launched in the market. Marketing and sales efforts are intensified, and the product or service is made available to a broader audience. Continuous monitoring, feedback collection, and performance evaluation are conducted to make necessary improvements and scale the innovation further.
- Continuous Improvement: The innovation process doesn’t end with the launch. It involves continuous monitoring, gathering customer feedback, and iterating on the product or service to enhance its features, address issues, and adapt to changing market dynamics. This allows for ongoing improvements and keeps the innovation competitive and relevant.
It’s important to note that innovation processes can vary across organizations and industries, and they may involve additional or slightly different stages depending on specific contexts.
However, the example above provides a general overview of the key stages involved in taking an idea from conception to implementation and continuous improvement.
What is an Innovation OS (Operating System)?
An innovation operating system (OS) refers to a set of interconnected processes, practices, and principles that enable and support innovation within an organization.
It is a systematic approach that provides a framework for managing innovation activities, fostering a culture of innovation, and driving sustainable results. It allows organizations to unlock their creative potential, drive growth, and maintain a competitive edge in the marketplace.
By building an innovation OS, organizations can foster a culture of innovation, streamline their innovation processes, and enhance their adaptability and resilience in a rapidly changing business environment.
Building an innovation OS in your organization can be highly beneficial for several reasons:
- Structured Approach: An innovation OS provides a structured approach to managing innovation initiatives. It establishes clear processes, guidelines, and tools for generating and evaluating ideas, developing concepts, and implementing innovations. This structured approach ensures that innovation efforts are aligned with the organization’s strategic goals and are carried out in a systematic manner.
- Efficiency and Scalability: By building an innovation OS, organizations can streamline their innovation processes, making them more efficient and scalable. It allows for the effective allocation of resources, such as budget, time, and talent, ensuring that innovation efforts are focused on the most promising opportunities. An innovation OS helps organizations avoid duplication of efforts and promotes collaboration and knowledge sharing across teams and departments.
- Culture of Innovation: An innovation OS plays a crucial role in fostering a culture of innovation within the organization. It establishes a set of shared values, norms, and behaviors that encourage and reward creative thinking, risk-taking, and experimentation. By embedding innovation into the organizational DNA, employees are empowered to contribute their ideas, challenge the status quo, and actively participate in the innovation process.
- Adaptability and Resilience: In today’s rapidly changing business landscape, organizations need to be adaptable and resilient to survive and thrive. An innovation OS helps organizations build these capabilities by continuously scanning the external environment for emerging trends and disruptions, and by encouraging a proactive response to change. It enables organizations to embrace new technologies, business models, and market opportunities, ensuring their long-term relevance and success.
How To Build an Innovation OS
To build an innovation OS in your organization, consider the following steps:
- Define Innovation Objectives: Clearly articulate the organization’s innovation objectives and align them with its overall strategic goals. Determine the types of innovation (e.g., incremental, disruptive) that are most relevant to the organization.
- Establish Processes and Governance: Develop a systematic approach to manage innovation initiatives. This may involve establishing an innovation committee or team, defining the stages and milestones of the innovation process, and implementing mechanisms for evaluating and selecting ideas.
- Encourage Collaboration and Cross-functional Teams: Foster a collaborative environment that encourages diverse perspectives and cross-functional collaboration. Encourage employees from different departments and levels to work together on innovation projects, leveraging their unique skills and expertise.
- Provide Resources and Support: Allocate dedicated resources, both financial and human, to support innovation initiatives. Provide training and development opportunities to enhance employees’ innovation skills and capabilities. Foster a supportive culture that celebrates experimentation, learning from failures, and embracing calculated risks.
- Measure and Track Progress: Establish key performance indicators (KPIs) and metrics to measure the effectiveness and impact of innovation efforts. Regularly track and review progress to ensure continuous improvement and alignment with organizational goals.
- Promote Knowledge Sharing and Learning: Implement mechanisms for sharing best practices, lessons learned, and success stories across the organization. Encourage a culture of learning and curiosity by providing platforms for knowledge exchange and creating opportunities for employees to explore new ideas and technologies.
How To Measure Innovation
Measuring innovation in a meaningful and actionable way requires a combination of qualitative and quantitative metrics that align with strategic goals.
Here are some key metrics and approaches that can inform business leaders and drive decision-making regarding investments, direction changes, and evaluating the health of innovation management:
- Innovation Metrics:
- Number of new ideas generated: Track the volume of ideas generated within the organization over a specific period. This metric reflects the level of ideation and creativity within teams.
- Conversion rate: Measure the percentage of ideas that progress to the next stage of evaluation or implementation. A low conversion rate may indicate challenges in the evaluation or selection process.
- Time to market: Measure the time it takes for an idea to go from concept to market. This metric reflects the organization’s ability to execute and deliver innovations efficiently.
- Revenue from new products or services: Track the revenue generated from newly introduced products or services. This metric demonstrates the success of innovations in the market and their contribution to overall business growth.
- Customer satisfaction and loyalty: Collect feedback from customers to gauge their satisfaction and loyalty toward innovative offerings. This metric provides insights into the value and impact of innovations on customer experiences.
- Employee engagement: Measure the level of employee engagement and satisfaction related to innovation initiatives. Engaged employees are more likely to contribute innovative ideas and actively participate in the innovation process.
- Innovation Portfolio Analysis:
- Innovation project portfolio: Evaluate the composition of the innovation project portfolio based on strategic objectives, risk levels, and potential returns. Assess the balance between incremental improvements and disruptive innovations, ensuring a healthy mix of short-term and long-term initiatives.
- Risk-reward assessment: Analyze the risk-reward profile of innovation projects to prioritize investments. Assess the potential impact, feasibility, and associated risks of each project to guide resource allocation decisions.
- Return on Innovation Investment (ROI2): Calculate the return on investment for innovation projects by considering both financial returns and strategic value. This metric helps evaluate the effectiveness of innovation investments and informs future decision-making.
- Innovation Culture and Capabilities:
- Employee surveys: Conduct surveys or interviews to gauge employees’ perceptions of the organization’s innovation culture, their level of empowerment, and their confidence in the innovation process.
- Training and development: Measure the participation rates and effectiveness of innovation-related training programs. Assess the impact of training initiatives on employees’ skills, knowledge, and mindset related to innovation.
- Collaboration and cross-functional engagement: Track the level of collaboration and engagement across different departments or teams to assess the organization’s ability to foster a collaborative and innovative environment.
Design Thinking + Lean Startup + Agile
Design Thinking, Lean Startup, and Agile are three methodologies that share a common focus on iterative and customer-centric approaches to problem-solving, product development, and business innovation.
While each approach has its unique principles and practices, they can be integrated to enhance the overall innovation process.
Here’s an overview of each methodology:
- Design Thinking: Design Thinking is a human-centered approach to problem-solving and innovation. It emphasizes understanding user needs, exploring possibilities, and iteratively developing solutions. Design Thinking involves empathy, ideation, prototyping, and testing to address complex problems and create meaningful experiences for users.
- Lean Startup: The Lean Startup methodology focuses on reducing waste and increasing efficiency in the product development process. It emphasizes rapid experimentation, validated learning, and iterative product releases to build a viable business model. The Lean Startup approach helps entrepreneurs and organizations test assumptions, gather feedback from customers, and pivot or persevere based on validated learning.
- Agile: Agile is an iterative and collaborative project management approach that enables flexibility and adaptability. It originated in the software development domain but is now widely used in various industries. Agile methodologies, such as Scrum or Kanban, emphasize incremental delivery, continuous improvement, and close collaboration between cross-functional teams and stakeholders. Agile allows for flexibility in responding to changing requirements and customer feedback.
How Design Thinking, Lean Startup and Agile are Better Together
Design Thinking, Lean Startup, and Agile can be integrated in a complementary manner to create a holistic innovation process:
- Design Thinking and Lean Startup: Design Thinking provides the initial phase of problem understanding, empathy, and ideation, while Lean Startup focuses on testing hypotheses, validating assumptions, and building a viable business model. The combination helps organizations avoid building products or services that do not meet customer needs or have market demand.
- Lean Startup and Agile: Lean Startup’s emphasis on rapid experimentation and validated learning aligns well with Agile’s iterative and adaptive project management approach. By incorporating Lean Startup principles within Agile frameworks, organizations can continuously validate and adjust their product or service offerings based on customer feedback and changing market conditions.
- Design Thinking and Agile: Design Thinking’s human-centered approach and focus on empathy and creativity can be integrated into Agile methodologies. Design Thinking techniques can be used during the early stages of the Agile process to understand user needs, ideate potential solutions, and create prototypes for testing and validation.
When these methodologies are combined, organizations can leverage the strengths of each to create a comprehensive approach to innovation.
Design Thinking helps organizations deeply understand users and their needs, Lean Startup ensures a systematic and iterative approach to testing assumptions and building viable business models, and Agile provides the project management framework to deliver value incrementally while adapting to changing circumstances.
The integration of these methodologies promotes a customer-centric, iterative, and efficient innovation process.
Innovation Centers, Innovation CoEs, Innovation Hubs, and Innovation Offices
Innovation Centers, Innovation Centers of Excellence (CoEs), Innovation Hubs, and Innovation Offices are all terms used to describe dedicated spaces or entities within organizations that foster innovation and drive strategic initiatives.
While the specific terminology and functions may vary, there are commonalities among these terms.
Here’s an overview of each concept:
- Innovation Centers: An Innovation Center is a physical or virtual space within an organization that serves as a hub for innovation-related activities. It is designed to facilitate collaboration, creativity, and experimentation among employees. Innovation Centers often provide resources, tools, and expertise to support ideation, prototyping, and testing of new ideas. They can serve as a centralized location for cross-functional teams to work on innovation projects and drive organizational change.
- Innovation Centers of Excellence (CoEs): An Innovation Center of Excellence (CoE) is a specialized team or unit within an organization that is responsible for driving innovation initiatives. It acts as a focal point for innovation-related activities and best practices across the organization. A CoE typically consists of experts in various innovation disciplines who provide guidance, support, and expertise to business units or teams. It may establish innovation frameworks, processes, and governance to ensure consistency and effectiveness in innovation efforts.
- Innovation Hubs: Innovation Hubs are physical or virtual spaces where organizations, startups, entrepreneurs, and other stakeholders come together to collaborate, exchange ideas, and drive innovation. They are often located in vibrant ecosystems, such as technology parks or innovation districts, and provide an environment that fosters serendipitous encounters and cross-pollination of ideas. Innovation Hubs may offer shared resources, networking opportunities, and access to mentors or investors, creating an ecosystem that supports and accelerates innovation.
- Innovation Offices: An Innovation Office is a department or unit within an organization that is specifically dedicated to managing and overseeing innovation initiatives. It serves as a centralized body responsible for setting the strategic direction, coordinating innovation activities, and supporting innovation efforts throughout the organization. An Innovation Office may develop innovation strategies, establish metrics for measuring progress, facilitate collaboration between different business units, and drive the implementation of innovative projects.
How Do They Relate?
While the terminology may vary, these concepts are all geared towards fostering innovation within organizations. They share the goal of creating a dedicated space, team, or entity to support and drive innovation initiatives.
The specific functions and scope of each concept may differ based on the organization’s needs and objectives.
In some cases, an Innovation Center may encompass an Innovation CoE or Innovation Office, while in others, these may exist as separate entities working in collaboration.
Innovation Hubs, on the other hand, are often external entities that organizations can engage with to access additional resources and networks.
Ultimately, these concepts are all aimed at creating an ecosystem that nurtures innovation, encourages collaboration, and drives organizational growth and transformation.
Why Create a Culture of Innovation
Creating a culture of innovation is crucial for organizations for several compelling reasons:
- Adaptation and Resilience: Innovation is essential for organizations to adapt and thrive in a rapidly changing business landscape. A culture of innovation enables organizations to proactively respond to market shifts, technological advancements, and evolving customer needs. It fosters agility and resilience, allowing organizations to stay ahead of the curve and remain competitive.
- Competitive Advantage: Innovation is a key driver of competitive advantage. Organizations that foster a culture of innovation are more likely to develop unique products, services, and processes that differentiate them from their competitors. They can create new markets, disrupt existing ones, and capture the attention and loyalty of customers. In today’s fast-paced world, sustaining a competitive edge is closely tied to an organization’s ability to innovate.
- Continuous Improvement: A culture of innovation promotes a mindset of continuous improvement. It encourages employees to challenge the status quo, seek better ways of doing things, and identify opportunities for optimization and efficiency gains. This focus on continuous improvement helps organizations streamline operations, enhance productivity, and deliver higher value to customers.
- Attract and Retain Talent: Innovative organizations tend to attract and retain top talent. A culture of innovation signals to potential employees that the organization values creativity, growth, and personal development. Innovative environments provide opportunities for employees to work on exciting projects, experiment with new ideas, and contribute to meaningful work. This can lead to increased employee satisfaction, engagement, and loyalty.
- Customer-Centricity: A culture of innovation places a strong emphasis on understanding and meeting customer needs. It encourages organizations to deeply understand customer pain points, preferences, and aspirations. By fostering a customer-centric mindset, organizations can develop products and services that truly resonate with their target audience, leading to increased customer satisfaction and loyalty.
- Future-Proofing: Innovation is crucial for future-proofing organizations. By embracing a culture of innovation, organizations become more adaptable and better equipped to anticipate and respond to disruptive forces. They can identify emerging trends, technologies, and business models, and leverage them to create new opportunities and navigate uncertainties.
- Organizational Growth and Success: Ultimately, a culture of innovation fuels organizational growth and success. It enables organizations to generate new revenue streams, expand into new markets, and achieve sustainable long-term growth. Innovation-driven organizations are better positioned to capitalize on market opportunities, overcome challenges, and create value for stakeholders.
Creating a culture of innovation is imperative for organizations seeking to remain competitive, achieve sustainable growth, and drive meaningful impact.
It empowers organizations to adapt to change, differentiate themselves, attract top talent, enhance customer satisfaction, and position themselves as leaders in their respective industries.
How To Create a Culture of Innovation
Creating a culture of innovation within an organization requires a deliberate and multifaceted approach.
Here are key steps you can take to foster a culture that embraces and nurtures innovation:
- Leadership Commitment:
- Start at the top: Leaders must demonstrate a genuine commitment to innovation and set an example for others to follow.
- Clearly communicate the importance of innovation: Articulate the vision, goals, and benefits of fostering a culture of innovation throughout the organization.
- Allocate resources: Provide the necessary budget, time, and talent to support innovation initiatives.
- Foster a Growth Mindset:
- Encourage a growth mindset: Cultivate an environment that embraces learning, curiosity, and continuous improvement.
- Embrace failure as a learning opportunity: Encourage experimentation and view failures as valuable lessons that contribute to growth and innovation.
- Celebrate and recognize innovation: Recognize and reward individuals and teams for their innovative contributions and achievements.
- Empower and Engage Employees:
- Encourage collaboration and diversity of thought: Foster a culture where different perspectives are valued and encouraged.
- Provide autonomy and decision-making authority: Empower employees to take ownership of their ideas and projects, allowing them to make decisions and drive innovation.
- Encourage open communication: Create channels for employees to share their ideas, provide feedback, and engage in meaningful discussions.
- Support Innovation Processes:
- Establish clear innovation processes: Define and communicate structured processes for generating, evaluating, and implementing ideas.
- Provide access to resources and tools: Ensure employees have access to the necessary resources, such as time, funding, technology, and training, to pursue innovative projects.
- Foster cross-functional collaboration: Encourage collaboration between different departments and teams to leverage diverse expertise and perspectives.
- Promote Knowledge Sharing:
- Create platforms for sharing: Establish forums, intranets, or digital platforms to facilitate the sharing of ideas, best practices, and lessons learned.
- Encourage cross-pollination of ideas: Facilitate interactions between individuals from different teams or departments to encourage the exchange of ideas and cross-fertilization of innovation.
- Embrace Risk-Taking and Agility:
- Encourage calculated risk-taking: Provide an environment where employees feel safe to take risks and try new approaches without fear of negative consequences.
- Foster agility and adaptability: Embrace an agile mindset that values flexibility, quick decision-making, and the ability to pivot in response to changing circumstances.
- Measure and Track Progress:
- Establish innovation metrics: Define key performance indicators (KPIs) to measure the effectiveness and impact of innovation efforts.
- Regularly assess and evaluate: Continuously monitor progress, assess the success of innovation initiatives, and make adjustments as needed.
Creating a culture of innovation is an ongoing journey that requires long-term commitment, consistency, and continuous improvement.
By following these steps and fostering an environment that encourages and supports innovation, organizations can unlock the creative potential of their employees and drive sustainable growth and success.
Getting Started with Innovation
Getting started with innovation is all about embracing curiosity and exploring new possibilities. Start by cultivating a mindset of openness and a willingness to challenge the status quo. Look for pain points or unmet needs in your surroundings, whether at work or in your daily life.
Generate ideas by brainstorming and allowing yourself to think freely. Validate your ideas by seeking feedback and conducting research.
Then, take action by creating prototypes or minimum viable products to bring your ideas to life. Remember, innovation is an iterative process, so be prepared to learn from failures and continuously refine your ideas.
Embrace the excitement of exploring new frontiers and making a positive impact through innovation.
Here is a collection of innovation How Tos to help you on your journey:
Creativity / Brainstorming / Ideation
How To Be Creative at Any Age
How To Generate More Ideas Using Brainwriting
How To Innovate Better with Little Stories of the Future
How To Reframe Problems as Creative Questions
How To Warm Up Your Creativity to Innovate Better
How To Innovate Better with Forced Connections
How To Innovate Better with Imagine If Cards
How To Innovate Better with Little Stories of the Future
How To Use Mock Press Releases to Innovate Better
How To Use the Double Diamond to Innovate Better
How To Innovate Better with Forced Connections
How To Innovate Better with Imagine If Cards
How To Innovate Better with Little Stories of the Future
How To Use Mock Press Releases to Innovate Better
How To Use Narrative Memos to Share Big Ideas Better
How To Use the Double Diamond to Innovate Better
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