Innovation and

Transformation
A Lifecycle Model

by Bryan Coffman and Michael Kaufman

An InnovationLabs White Paper
InnovationLabs LLC
 Innovation and Transformation: A Lifecycle Model • Page 2
An InnovationLabs White Paper

Table of Contents
Abstract 3
Defining Innovation and a few consequences 3
Innovating too early 4
Innovating too late 5
General model of the parent and offspring in the innovation process 6
Innovation and transformation 7
Transforming to achieve scale 8
Transforming to radically increase the threshold of viability 8
Transforming to find new market space 9
Pathologies in Innovation Transformation 10
Summary 11
 Innovation and Transformation: A Lifecycle Model • Page 3
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Abstract
The lifecycle model has been used many times to illustrate the growth, maturity
and decay of an organization. The normal-curve product cycle and the s-curve are
both visual examples. In this paper, the lifecycle model is used visually to explore
the dynamics behind innovation: when to innovate, characteristics of the parent
and child organizations, and some uses of innovation in transformation.

Defining innovation and a few

consequences
2-'"'"8('""#$%&'#"(%")( An!"#$""%&'($%"#$)#*+,$"+*#')#-)%.+(/$"0#"+1#%2#3+24+$&+*#%,#')#"+156#
-29(3#",2:;2"32,(
innovation is defined as “something new or perceived of as new.” This invokes
7/$)#$"&%8+)#'#1$*+#2'"0+#%,#+9'.3:+);#,2%.#'#<'2#%,#)%'3#1$(/#(/+#
a wide range of examples, from a bar of soap with the words new and improved
!"
1%2*)#!"#$!%"&!'()*+,#&!)('.3+*#'42%))#(/+#3'48'0+#(%#(/+#*$)4%&+2=#
stamped across the package to the discovery of carbon nanotubes. Innovations may
%,#4'2<%"#"'"%(><+)5#?""%&'($%")#.'=#)32$"0#,2%.#'#&'2$+(=#%,#)%>24+)@#
spring from a variety of sources: improvements that come about through quality
$.32%&+.+"()#(/'(#4%.+#'<%>(#(/2%>0/#A>':$(=#32%02'.)B#<2'"*#"+1#
programs; brand new business or product ideas that arise through innovation
<>)$"+))#%2#32%*>4(#$*+')#(/'(#'2$)+#(/2%>0/#$""%&'($%"#32%02'.)B#'"*#
programs; and ah-ha ideas that spring up out of serendipity.
'/C/'#$*+')#(/'(#)32$"0#>3#%>(#%,#)+2+"*$3$(=5##
#
D%)(#%20'"$E'($%")#>"*+2)('"*#(/+#"++*#(%#$""%&'(+#<>(#.'=#"%(#/'&+#
Most organizations understand the need to innovate but may not have a clear
'#4:+'2#3$4(>2+#%,#1/=#$(F)#"+4+))'2=;#%2#%,#(/+#4%")+A>+"4+)#%,#3>(($"0#
picture of why it’s necessary, or of the consequences of putting an innovation in
'"#$""%&'($%"#$"#.%($%";#3'2($4>:'2:=#$,#(/+#$""%&'($%"#$)#%,#'#:'20+2#
motion, particularly if the innovation is of a larger scale or different scope than its
)4':+#%2#*$,,+2+"(#)4%3+#(/'"#$()#3'2+"(#%20'"$E'($%"5#G,(+";#$""%&'($%")#
parent organization. Often, innovations will radically change the game for an
1$::#2'*$4'::=#4/'"0+#(/+#0'.+#,%2#'"#%20'"$E'($%";#'"*#1/$:+#(/+#32%.C
organization, and while the promise of increased success and profitability beckons,
$)+#%,#$"42+')+*#)>44+))#'"*#32%,$('<$:$(=#<+48%");#(/+#+9$)($"0#%20'"$E'C
the existing organization can feel threatened.
($%"#4'"#,++:#(/2+'(+"+*5##
#

A general
lifecycle model

(82"2+%5(5'-234352( For a simple look at this dynamic, we present a model which depicts a stylized
H%2#'#)$.3:+#:%%8#'(#(/$)#*="'.$4;#1+#32+)+"(#'#.%*+:#1/$4/#*+3$4()#'#
lifecycle of an organization. Organizations start as ideas, usually ideas about
)(=:$E+*#:$,+4=4:+#%,#'"#%20'"$E'($%"5#G20'"$E'($%")#)('2(#')#$*+');#>)>C
#)25(
products or services, not about organizations. Once the idea has enough credence,
'::=#$*+')#'<%>(#32%*>4()#%2#)+2&$4+);#"%(#'<%>(#%20'"$E'($%")5#G"4+#(/+#
an organization must coalesce around it. Without the organization, the idea can
$*+'#/')#+"%>0/#42+*+"4+;#'"#%20'"$E'($%"#.>)(#4%':+)4+#'2%>"*#$(5#
I$(/%>(#(/+#%20'"$E'($%";#(/+#$*+'#4'"#"+&+2#'33+'2#$"#(/+#.'28+(3:'4+#
%='5'&4(.%4(>%$2(.%"4( '"*#2+':$E+#$()#>($:$(=5#G"4+#(/+#%20'"$E'($%"#$)#,%2.+*;#$(#<%(/#'((2'4()#
--2+2"&(?'"),(#-(.2&+'3,@( '"*#4%")>.+)#2+)%>24+)5#?"#(/+#)('2(C>3#3/')+;#(/+#4%")>.3($%"#%,#2+C
2A2")'"8(#"(9>%&B,(=2'"8( )%>24+)#%>()(2$3)#(/+#'((2'4($%"#%,#2+)%>24+)#J4'3$(':#'"*#2+&+">+)K5#!(#
%A>2)(#"(&>2(3;+$2(C%"( )%.+#3%$"(#(/$)#2+:'($%")/$3#$"&+2()#'"*#(/+#%20'"$E'($%"#'"*#$()#$*+'#
8%"'D%&'#"(#+(%"('");,&+4(
42%))+)#'#(/2+)/%:*#%,#&$'<$:$(=5#L=#&$'<$:$(=#1+#.+'"#-%)%./#!+0!1#)%2
 Innovation and Transformation: A Lifecycle Model • Page 4
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never appear in the marketplace and realize its utility. Once the organization is
formed, it both attracts and consumes resources. In the start-up phase, the
consumption of resources outstrips the attraction of resources (capital and
revenues). At some point this relationship inverts and the organization and
Viability may have many its idea crosses a threshold of viability. By viability we mean capable of
different kinds of metrics, separate existence. The organization may continue to draw upon external
depending on what’s capital for support but at the simplest level, its revenues cover its expenses;
being graphed on the cash in exceeds cash out.
curve (an organization or
an industry for example). As the organization nears the maintenance stage, it figures out how to play
Simple measures include the game. In other words, it learns which combinations of processes and
profitability, positive cash structures will help it reach viability. These processes and structures are
flow, ROI, ROCE, among formalized into systems and codified, or standardized to whatever degree
others. possible, depending on the industry. In part, it’s this codification that allows
for efficiencies that push the organization above the viability threshold.
There are other factors, such as adjusting the features of the product to
harmonize more with customer wants and needs and figuring out which channels
to use for marketing.

The organization then enters a stage of maintenance. Its current systems are
sufficient to keep it viable. Then as competition puts pressure on pricing or creates
new innovations, the threshold of viability increases. This places a demand on the
organization to improve its processes, products, services and structures in order to
remain viable. It may go through several rounds of this improvement over its
lifetime. If the bar is raised dramatically, it will place a demand for radical
innovation on the organization and also set a window within which the
organization can respond before it runs out of reserves.
At some point, either because of internal changes or external forces, the
organization will experience fade, reducing viability. It’s possible to recover from
fade, but for the sake of generality, the diagram on the preceding page shows the
organization crossing the threshold of viability once more and falling into collapse.

Innovating too early

Somewhere within this cycle the organization will be forced to innovate. It takes
time for an idea to reach maturity. Some formal processes for innovation can
accelerate the process but whether it’s accelerated or not, it also requires resources.
The parent organization must be in a condition to either generate these resources
internally or find them from external sources. Therefore, there are some logical
times for an organization to innovate and some less than logical times. During
ideation and start-up, resources are fully deployed in trying to achieve viability. To
take on an additional start-up can add stress to the system and overburden it,
causing premature collapse.
 .22,&#$.,2(8#2(#88%0%'#$%($"%(+',8%--(/3$(!"%$"%'(.$7-(#88%0%'#$%)(,'(
2,$1(.$(#0-,('%C3.'%-('%-,3'8%-5(;"%(+#'%2$(,'*#2.:#$.,2(=3-$(/%(.2(#(
8,2).$.,2($,(%.$"%'(*%2%'#$%($"%-%('%-,3'8%-(.2$%'2#004(,'(9.2)($"%=(
9',=(%A$%'2#0(-,3'8%-5(;"%'%9,'%1($"%'%(#'%(-,=%(0,*.8#0($.=%-(9,'(#2(
Innovation and Transformation: A Lifecycle Model • Page 5
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An InnovationLabs White Paper
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#/.0.$45(;,($#>%(,2(#2(#)).$.,2#0(-$#'$?3+(8#2(#))(-$'%--($,($"%(-4-$%=(
It’s not impossible, and there are some innovators who are brilliant at keeping
#2)(,&%'/3')%2(.$1(8#3-.2*(+'%=#$3'%(8,00#+-%5(6$7-(2,$(.=+,--./0%1(#2)(
several ideas alive at once on shoestring budgets. But most organizations will have
!"#$%&'(%")*+)*+(,$&!)-&'().'/0(!1"#$+1(0!/"!2$-(/!(#*3'4(
trouble bringing multiple ideas through start-up at once.
$"%'%(#'%(-,=%(.22,&#$,'-(!",(#'%(/'.00.#2$(#$(>%%+.2*(-%&%'#0(.)%#-(
(
#0.&%(#$(,28%(,2(-",%-$'.2*(/3)*%$-5(E3$(=,-$(,'*#2.:#$.,2-(!.00("#&%( !"
""#$%&'"7(&##(5%&2( 5!60(7$0!(/0(3#,,#*8(-'"1/-0(,#"'(0#8(9#"(#"+/*):/!)#*0(!#(/!!',-!()**#2
;/!)#*(<1'*()!60(!##(&/!'4(=1'(!1"'01#&.(9#"(;)/%)&)!>(1/0(%''*("/)0'.(
Innovating too late !1"#$+1(0#,'('?!'"*/&(9#"3'0(/*.(!1'(#"+/*):/!)#*(,#$*!0(/*('99#"!(!#(
"#$%&'#"(%")(*+%",-#+.%&'#"/(0(1'-234352(6#)25(
It’s just as common, perhaps more so, for organizations to attempt innovation when
3#$*!'"(!1'()*3"'/0'()*(#".'"(!#(0!/;'(#99(&/3@(#9(;)/%)&)!>4(A#<';'"8(%'2
it’s3/$0'(#9(!1'(&/+(!),'()*;#&;'.()*(9)*.)*+(!1'().'/(/*.(%")*+)*+()!(!#(9"$)2
too late. The threshold for viability has been raised through some external

forces and the organization mounts an effort to counter the increase in order to
!)#*8(!1'(#"+/*):/!)#*(0$99'"0(0&).)*+(+"#<!18("'.$3'.(-"#9)!/%)&)!>(/*.(
stave off lack of viability. However, be- cause of the lag time involved in finding
&#<'"("'!$"*0()*(!1'()*!'"),4(59()!(</*!0(!#("',/)*(/&);'8()!()0(9#"3'.(!#(
the.#<*0):'8((/*.(.#<*0):)*+()*;#&;'0(</!31)*+(!1'(3#,-/*>60('?-'"!)0'(
idea and bringing it to fruition, the organization suffers sliding growth, reduced
profitability and lower returns in the interim. If it wants to remain alive, it is forced
/*.(3#.)9)3/!)#*(#9(0$33'00(</&@(#$!(!1'(.##"4(B*&>(0#(,$31(#9(/*(#"2
to+/*):/!)#*60(0$33'00(,#.'&(3/*(%'(3#.)9)'.()*(.#3$,'*!0(#"(-"/3!)3'0(
downsize, and downsizing involves watching the company’s expertise and
codification of success walk out the door. Only so much of an organization’s
#$!0).'(#9(!1'(1$,/*()*!'"-'"0#*/&('?-'")'*3'4(5!(0),-&>(3/*6!(%'(3/-2
!$"'.4(5*(!1'('99#"!(!#(,/)*!/)*(;)/%)&)!>8(!1'(#"+/*):/!)#*(,/>(0),-&>(
3#*0$,'()!0'&9(/*.(9/&&(9$"!1'"()*!#(3#&&/-0'4((
(
C#!1(#9(!1'0'(3/0'0(/"'('?!"','('?/,-&'0(#9(-/!1#&#+)3/&(%'1/;)#"4(5*(
-"/3!)3'8(,/*>(#"+/*):/!)#*0(.#(-$&&(#$!(#9(/(&/!'(3>3&'()**#;/!)#*(/*.(
 Innovation and Transformation: A Lifecycle Model • Page 6
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success model can be codified in documents or practices outside of the human

interpersonal experience. It simply can’t be captured. In the effort to maintain
viability, the organization may simply consume itself and fall further into collapse.

Both of these cases are extreme examples of pathological behavior. In practice,

many organizations do pull out of a late cycle innovation and others can run
multiple ideas in start-up. However, there are always consequences in terms of
individual and organizational stress.

There is an optimal zone in which an organization can innovate. After the start-up
is complete and systemization is well underway and hope- fully before the
competition or external conditions force a radical shift of the threshold of viability
upwards. Because the first condition can be known, but the second condition is
unknown, risk can be reduced by starting the ideation phase more to the left, and
conducting the ideation on a regular basis over the life of the organization. That
way, resources don’t have to be radically shifted all of a sudden to support a
nascent innovation process. They’re already in place.

When you begin an innovation cycle, it’s important to remember that you will push
your own threshold of viability up. Why? Simply because the organization now has
to eat for two. If the organization is large and the innovations are smaller, this may
not be so much of a factor. But another reason that organizations fail to innovate
when they should is because the feeding of resources to a new idea and start-up
within the company cuts into profitability and makes the organization more
susceptible to variability in the marketplace whether it’s due to competition or the
economy in general. Many organizations therefore innovate only when they have
to, which means it’s too far towards the right side of the curve. To survive while
eating for two, they’ll risk entering semi- starvation.

General model of the parent

and offspring in the innovation
process
The next diagram shows a model of a healthy innovation cycle. Note that the
parent organization shows a dip in viability due to the support of the new idea until
it reaches maturity. Note also that when the new idea reaches maturity, it becomes
the factor that raises the viability threshold for the rest of the industry and also for
its parent assuming they’re both in the same industry.

Some other features can be highlighted. While the parent organization is in its own
maturity, its innovative offspring is in adolescence or child- hood. The two idea-
organizations therefore require different handling and usually different types of
people to guide them. Often there is one senior management team or group of
organizers working with both and it’s hard for these people sometimes to keep the
two ideas separate in their thinking and actions. They may place the same demands
on the adolescent idea that they place on the parent. They may wish to consolidate
the two and treat them as one. They may place the demands of innovation in the
hands of already overburdened operations people who are more focused on
improving efficiency.

The parent has been through a whole cycle of codification and has learned how the
game is played. The adolescent—except in the most trivial improvements and
innovations—is learning how to create and play a new game. It can’t be held to the
same standards of codification and efficiency as the parent.
9%+2"&(%")(#--,9+'":('"( !"(!$!"#$<(&#)!$%&'()*+(!*%)$-"%,-$($2*<$*)$3*(7*1*!6$28#$!%$!"#$-8<<%&!$
82('""#$%&'#"(9+#32,,( %.$!"#$)#,$*2#($8)!*1$*!$&#(9"#-$4(!8&*!6/$B%!#$(1-%$!"(!$,"#)$!"#$)#,$
*2#($&#(9"#-$4(!8&*!65$*!$7#9%4#-$!"#$.(9!%&$!"(!$&(*-#-$!"#$3*(7*1*!6$
!"&#-"%12$.%&$!"#$&#-!$%.$!"#$*)28-!&6%*",%*#-!%.!/%0)-%1*/(")%(--84*)'$
Innovation and Transformation: A Lifecycle Model • Page 7
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!"#6>&#$7%!"$*)$!"#$-(4#$*)28-!&6/$

Two$ types of people and two related types of thinking must exist at the same time.
NotC%4#$%!"#&$.#(!8&#-$9()$7#$"*'"1*'"!#2/$D"*1#$!"#$<(&#)!$%&'()*+(!*%)$
only that, they must still collaborate with one another so that the new
*-$*)$*!-$%,)$4(!8&*!65$*!-$*))%3(!*3#$%..-<&*)'$*-$*)$(2%1#-9#)9#$%&$9"*12;
innovation doesn’t cannibalize the parent. If the two can work in harmony, then
"%%2/$@"#$!,%$*2#(;%&'()*+(!*%)-$!"#&#.%&#$&#E8*&#$2*..#&#)!$"()21*)'$
they may realize synergies. One type of thinking is focused on the effectiveness,
()2$8-8(116$2*..#&#)!$!6<#-$%.$<#%<1#$!%$'8*2#$!"#4/$F.!#)$!"#&#$*-$%)#$
efficiencies and infrastructure development of the parent and the other is focused
on-#)*%&$4()('#4#)!$!#(4$%&$'&%8<$%.$%&'()*+#&-$,%&=*)'$,*!"$7%!"$()2$
the vision and system creation of the offspring.
*!>-$"(&2$.%&$!"#-#$<#%<1#$-%4#!*4#-$!%$=##<$!"#$!,%$*2#(-$-#<(&(!#$*)$
Many organizations are not acutely aware that these two modalities of thought and
!"#*&$!"*)=*)'$()2$(9!*%)-/$@"#6$4(6$<1(9#$!"#$-(4#$2#4()2-$%)$!"#$
action must coexist. They tend to think of the innovation as an integral part of the
(2%1#-9#)!$*2#($!"(!$!"#6$<1(9#$%)$!"#$<(&#)!/$@"#6$4(6$,*-"$!%$9%)-%1*;
parent whose purpose is to feed and save and support the parent. They treat it as if
2(!#$!"#$!,%$()2$!&#(!$!"#4$(-$%)#/$@"#6$4(6$<1(9#$!"#$2#4()2-$%.$*);
it were either mature, or as a thing that requires no organic process of growth and
)%3(!*%)$*)$!"#$"()2-$%.$(1&#(26$%3#&78&2#)#2$%<#&(!*%)-$<#%<1#$,"%$
exploration. Adolescents make mistakes in order to learn. It’s not a question of
(&#$4%&#$.%98-#2$%)$*4<&%3*)'$#..*9*#)96/$$
tolerating
$ failure, but of understanding that this is how learning happens. If the
adolescent organization doesn’t learn, then its solutions will rise no higher than
@"#$<(&#)!$"(-$7##)$!"&%8'"$($,"%1#$9691#$%.$9%2*.*9(!*%)$()2$"(-$
that of the parent and the innovation threatens to become incremental, thus
1#(&)#2$"%,$!"#$'(4#$*-$<1(6#2/$@"#$(2%1#-9#)!G#A9#<!$*)$!"#$4%-!$
squandering much of the investment. At the same time, it’s easy for adolescent
!&*3*(1$*4<&%3#4#)!-$()2$*))%3(!*%)-G*-$1#(&)*)'$"%,$!%$9&#(!#$()2$
ideas to collapse, so they must be subjected to a combination of rigor and
nurturing.
""#$%&'#"(%")(*+%",-#+.%&'#"/(0(1'-234352(6#)25(
Innovation and transformation
The word transformation is used as commonly and generally as innovation.
Anything—from changing the overnight delivery vendor to a large merger—can
qualify as a transformation. We will describe three different types of
transformation and the role that innovation plays in them: transforming to attain
scale, transforming to drastically raise the threshold of viability, and
transformations to find new market space (possibly replacing the parent in the
process).
 Innovation and Transformation: A Lifecycle Model • Page 8
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Transforming to achieve scale

An idea can become manifest as an organization and cross the thresh- old of
viability but still fail rapidly after that. Success attracts attention and competition.
All start-ups know that they’re in a race to achieve scale. Distribution must grow to
attempt to find market saturation. In some industries, the difference between
achieving scale and not is fatal: different formats for DVD players is an example.
One will win and one will lose.

Kirsten Moy and Greg Ratliff of the Aspen Institute’s Economic Opportunities
Program have created a nice model describing three phases of innovation that
accompany the push to scale in collectives and net- works but the model is
applicable more generally for all organizations. Their three phases are product
innovation, infrastructure innovation and industry innovation. First, the product is
designed for scale, including efforts at standardization and simplification (in
manufacture, delivery and perception). Next, infrastructure, partners, capital and
technology are employed to till the field, so to speak, making it ready for planting.
In!"#$%&'(!)*+(%,-).*/'!&'"#,-*+(/,',(0,0#.*'1"*2"3"%(+4"0'*(5*,0'"!4"2,&!6
the case of a major innovation like the automobile, infrastructure innovation !"
,"/.*&02*(5'"0*0"7*/($!-"/*(5*-&+,'&%8*
included the creation of filling stations, paved roads and distribution for repair
*
parts. Finally the industry phase includes regulatory policy, strategic positioning,
91"/"*'1!""*/'&#"/*(3"!%&+*(0"*&0('1"!.*/(*'1&'*71,%"*'1"*+!(2$-'*,/*:"6
the development of intermediaries, and often new sources of capital.
,0#*,00(3&'"2.*'1"*,05!&/'!$-'$!"*/'&!'/*,'/*(70*+!(-"//*&02*&5'"!*&0*

&++!(+!,&'"*%&#.*'1"*,02$/'!)*,00(3&',(0/*;,-;*,08*91"*!"/$%'&0'*-$!3"*
These three stages overlap one another, so that while the product is being
&%%(7/*'1"*(!#&0,<&',(0=&02*,0*5&-'*&%%*(!#&0,<&',(0/*,0*'1"*(!,#,0&%*
innovated, the infrastructure starts its own process and after an appropriate lag, the
+!(2$-'>/*"-(/)/'"4='(*#(*'(*/-&%"8*?'*&%/(*1&/*&*/,2"*"55"-'*(5*+(//,:%)*
industry innovations kick in. The resultant curve allows the organization—and in
-!"&',0#*:&!!,"!/*'(*"0'!)*&/*'1"*'1!"/1(%2*5(!*3,&:,%,')*-(0',0$"/*'(*
fact all organizations in the original product’s ecosystem—to go to scale. It also
!,/"8**
has a side effect of possibly creating barriers to entry as the threshold for viability
*
continues to rise.
+%",-#+.'"7(&#(+%)'3%554( @-&%"*-&0*,0-!"&/"*'1"*'1!"/1(%2*(5*3,&:,%,')*:$'*$/$&%%)*&*/$:/"'*(5*'1"*
"3+2%,2(&82(&8+2,8#5)(#-( ,02$/'!)*'&#/*&%(0#8*@(4"',4"/*,0-!"&/,0#*'1"*'1!"/1(%2*/"!3"/*'(*(+"0*
Transforming to radically
'%9'5'&4( 2((!/*5(!*'1"*-(4+"',',(08*?00(3&',0#*'1"*,05!&/'!$-'$!"*&!($02*&*+!(26
increase the threshold$-'6,2"&*-&0*4&;"*,'*"&/,"!*5(!*,0-$4:"0'/*'(*"A+&02*'1",!*(55"!,0#/*
of viability
Scale can increase the threshold of viability but usually a subset of the industry
'1!($#1*-1&00"%/*-!"&'"2*:)*'1"*,05!&/'!$-'$!"8*B0*"A&4+%"*,/*'1"*%&)6
tags along. Sometimes increasing the threshold serves to open doors for the
,0#*(5*5,:"!*,0*%(0#*1&$%.*-,')*!,0#/*&02*%&/'*4,%"*&++%,-&',(0/8*C,:"!>/*
competition. Innovating the infrastructure around a product-idea can make it easier
!&2,-&%%)*,4+!(3"2*:&027,2'1*&%%(7/*5(!*'!"4"02($/*5(%%(76(0*+!(2$-'*
,00(3&',(0/*&02*4&;"/*,'*"&/,"!*5(!*4&0)*-(4+&0,"/*'(*#"'*'1",!*+!(26
$-'/*,0'(*'1"*3,!'$&%*4&!;"'+%&-"8*D$'*,'*&%/(*!&,/"/*'1"*:&!*:"-&$/"*-$/6
'(4"!/*0(7*"A+"-'*4(!"*5!(4*&*7":*+!"/"0-"*'1&0*&*2,#,'&%*:!(-1$!"8**
*
B0*(!#&0,<&',(0*4&)*-1((/"*'(*!&2,-&%%)*!&,/"*'1"*3,&:,%,')*:&!*'1!($#1*
&*+!(2$-'*,00(3&',(0.*&*+!(-"//*,00(3&',(0*(!*&*:$/,0"//*4(2"%*,00(3&6
 Innovation and Transformation: A Lifecycle Model • Page 9
An InnovationLabs White Paper

for incumbents to expand their offerings through channels created by the

infrastructure. An example is the lay- ing of fiber in long haul, city rings and last
mile applications. Fiber’s radically improved bandwidth allows for tremendous
follow-on product innovations and makes it easier for many companies to get their
products into the virtual marketplace. But it also raises the bar because customers
now expect more from a web presence than a digital brochure.
An organization may choose to radically raise the viability bar through a product
innovation, a process innovation or a business model innovation, just to name
three. An example is Apple with its iPod—a true transformation in the mp3 player
field. In addition to capturing market share, the innovative design raises the
!"#$%&'(")'*+,%-+'"').)#+-'/%0'#(+)+'#.1+)'%/',%-1+#$#%0)2'3(+.')$-456
specifications for performance from other manufacturers, setting off waves of
#"&+%4)5.',0+"#+'10%*5+-)'/%0'#(+$0',%-1+#$#%0)'"&7'$&,0+")+'*"00$+0)'#%'
innovation in their organizations.
!"
+&#0.'$&'#(+'-"08+#2'95)%:'%57'10%74,#)'-".'*+'0"1$75.'7$),"07+7'*+6

,"4)+'#($)'8$&7'%/'$&&%!"#$%&',"&',0+"#+',%--%7$#$;"#$%&'$&'+"05$+0'
10%74,#'<+&+0"#$%&)2'=&7++7:'$#>)',%--%&'/%0'0"1$7',.,5+)'%/'$&&%!"#$%&'
Some organizations create havoc for their competitors by not trying to raise the
5$8+'#($)'#%'*%4&,+'/0%-'10%74,#'#%'10%74,#'$&)#+"7'%/'/%,4)$&<'%&'"')$&6
threshold all in one shot but by making innovation a standard way of doing
<5+'10%74,#'"&7'$#)'4&7+05.$&<'#+,(&%5%<.:').)#+-)'%0'10%,+))+)2'
business. They spin off rapid fire innovations that are al- most impossible to
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respond to on an incremental or one-off basis. Innovation has become a system for
+%",-#+.'"7(&#(-'")("28( these
9'#($07'8$&7'%/'#0"&)/%0-"#$%&'0+5$+)'%&'/$&7$&<'&+?'-"08+#')1",+@%&+'
types of competitors. They simultaneously create problems for their
.%+92&(,:%32( #("#'$)'0+5"#$!+5.'4&%,,41$+7'*.'%#(+0'15".+0)2'3(+)+'"0+'#(+'!"#$%&'$()*'
competitors and increase barriers to entry in the market. Also, old products may be
1%145"0$;+7'*.'A2'B("&'C$-'"&7'D+&E+'F"4*%0<&+''$&'#(+$0'*%%8'+"#$%
rapidly discarded because this kind of innovation can create commoditization in
,'$()%-./(.$012'9'-%!+'$&#%'&+?'-"08+#')1",+',"&'*+'"',%41'$&')+!+0"5'
earlier product generations. Indeed, it’s common for rapid cycles of innovation like
?".)2'=#'-".'*+'"'?".'#%'*"$5'%4#'%/'"'#0%4*5+7'$&74)#0.'"&7'$#'"5)%'-".'
this to bounce from product to product instead of focusing on a single product and
its5%?+0'#(+'#(0+)(%57'%/'!$"*$5$#.:'-"8$&<'$#'+")$+0'/%0'#(+'#0"&)/%0-$&<'
underlying technology, systems or processes.
%0<"&$;"#$%&'#%'-"8+'#(+')($/#2'3($)'-+"&)'$#'-$<(#'*+'+")$+0'#%'*+,%-+'
10%/$#"*5+'%0'#%'<+&+0"#+'0+#40&'$&'#(+'&+?')1",+'#("&'$#'?")'$&'#(+'%57'
Transforming to find new)1",+2'3(+'#0"&)/%0-"#$%&'-".'0+)45#'$&'"')1$&'%//'%/'"'&+?'*4)$&+)):'
market space &+?'10%74,#'5$&+)'%0'&+?'"115$,"#$%&)'/%0'-%7$/$+7:'+G$)#$&<'10%74,#)2''
A'third kind of transformation relies on finding new market space—one that is
relatively unoccupied by other players. These are the blue oceans popularized by
=&')%-+',")+)'"&'%0<"&$;"#$%&')++8)'#%'$&&%!"#+'$&'%07+0'#%')%'#0"&)6
W./%0-'#(+'1"0+&#'#("#'$#'7$)"11+"0)'$&'+//+,#:'#(%4<('#(+'&"-+'-".'0+6
Chan Kim and Renée Mauborgne in their book Blue Ocean Strategy. A move
into new market space can be a coup in several ways. It may be a way to bail out of
-"$&2'H%&<'#+0-')4)#"$&"*$5$#.'7+1+&7)'%&'#(+'4)+'%/'#($)'-+#(%7'41%&'
a troubled industry and it also may lower the threshold of viability, making it easier
%,,")$%&'*+,"4)+'#(+'*4)$&+))'#(+'%0<"&$;"#$%&'%0$<$&"55.'<%#'$&#%'&%'
for the transforming organization to make the shift. This means it might be easier
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<"-+'*+,"4)+'&%'%&+'$)'<%$&<'#%'*+'15".$&<'#(+'%57'%&+'/%0'5%&<2'=/'#(+'
%0<"&$;"#$%&'$)'4&4)+7'#%'$&&%!"#$%&'"&7'7%+)&>#'("!+'"').)#+-"#$,'"16
10%",('#%'$#'*+.%&7'10%,+))'$-10%!+-+&#:'$#'?$55'*+'-4,('-%0+'7$//$,45#'
#%'7$),%!+0'"'&+?'-"08+#')1",+2'3($)'7$),%!+0.',"&>#'*+'-"7+'?$#(%4#'
"&.'0+5"#$%&'#%'#(+'10+!$%4)'*4)$&+))@#(+0+'-4)#'*+')%-+')%0#'%/'-$6
<0"#$%&'1"#('"#'5+")#'$&'#(+'8&%?5+7<+'*")+'0+10+)+&#+7'*.'#(+'+-15%.6
 Innovation and Transformation: A Lifecycle Model • Page 10
An InnovationLabs White Paper

to become profitable or to generate return in the new space than it was in the old
space. The transformation may result in a spin off of a new business, new product
lines or new applications for modified, existing products.

In some cases an organization seeks to innovate in order to so trans- form the

parent that it disappears in effect, though the name may re- main. Long term
sustainability depends on the use of this method upon occasion because the
business the organization originally got into no longer exists. The organization
really needs to learn how to play a new game because no one is going to be playing
the old one for long. If the organization is unused to innovation and doesn’t have a
systematic approach to it beyond process improvement, it will be much more
difficult to discover a new market space. This discovery can’t be made without any
relation to the previous business—there must be some sort of migration path at
least in the knowledge base represented by the employees and managers of the
parent company.

This leap is also hard to make in a humane way without destroying many lives in
the process. Organizational transformation on this scale involves individual human
!"#$%#&'(!")!#!)*+%(,*-+"(./+"'0$/-+.!$"(+'(1&%%(2&3+*'&(-+"4($0(.,&(
transformation as well because many of the jobs in the parent will disappear in the
5$2'(!"(.,&(6+/&".(1!%%()!'+66&+/(!"(.,&($00'6/!"78(9,&"(6$''!2%&:(6&$6%&( !"
offspring. When possible, people ought to be facilitated to make the transition to
$*7,.(.$(2&(0+3!%!.+.&)(.$(-+;&(.,&(./+"'!.!$"(.$(.,&($00'6/!"7($/(.$($/<
the offspring or to organizations in adjacent industries that are not so severely
7+"!=+.!$"'(!"(+)5+3&".(!")*'./!&'(.,+.(+/&("$.('$('&#&/&%4(.$*3,&)(24(
touched by the external changes calling for the transformation.
.,&(&>.&/"+%(3,+"7&'(3+%%!"7(0$/(.,&(./+"'0$/-+.!$"8((

(
%&8#5#9'2,('"( 9&(/&3$7"!=&(+.(%&+'.(0!#&(6+.,$%$7!&'(!"(./+"'0$/-+.!$"(&00$/.'8(?1$($0(
""#$%&'#"( .,&-(1&/&(3$#&/&)(+.(.,&(2&7!""!"7($0(.,!'(6+6&/8(
Pathologies in Innovation
+%",-#+.%&'#"( (
Transformation @8( A""$#+.!"7(.$$('$$"($"(.,&(6+/&".B'(3*/#&:(2&0$/&(.,&(6+/&".(,+'('.+<
We recognize at least five pathologies in transformation efforts. Two of them were
2%&(#!+2!%!.4(+")(3+"('*66$/.(!.'&%0(+")(.,&("&1(!)&+(+.(.,&('+-&(
covered at the beginning of this paper.
.!-&8(?,&/&(!'(.$$(%!..%&(.!-&(+")(+..&".!$"(+#+!%+2%&(+")(/&'$*/3&'(
1. Innovating too soon on the parent’s curve, before the parent has stable
+/&(.!7,.8(
viability and can support itself and the new idea at the same time. There is
C8( A""$#+.!"7(.$$(%+.&(1,&"(.,&(6+/&".(!'(%$'!"7(#!+2!%!.4(+")(0!7,.!"7(
too little time and attention available and resources are tight.
2.0$/('*/#!#+%8(A"(.,!'(3+'&(.,&/&(+/&(+%'$(.$$(0&1(/&'$*/3&'(.$('6/&+)(
Innovating too late when the parent is losing viability and fighting for
+/$*")(.,&(-+!".&"+"3&($0(.,&(6+/&".:(.,&('./&''($0()$1"'!=!"7(!0(
survival. In this case there are also too few resources to spread around the
/&D*!/&):(+")(.,&('*66$/.($0(+("&1($/7+"!=+.!$"8(
E8( F$.(/&+%!=!"7(.,+.(.,&/&(+/&(.1$(!)&+'(+")($/7+"!=+.!$"'($33*64!"7(
.,&('+-&(6+/&".(+")(.,+.(.,&4("&&)()!00&/&".(./&+.-&".:(/&'$*/3&':(
&>6&3.+.!$":()!+%$7(+")(';!%%'8(?,!'(,+66&"'(!"($/7+"!=+.!$"'(1!.,(
0$/-+%(!""$#+.!$"(6/$3&''&'(2*.(!.(+%'$(,+66&"'(1,&"(+"(!""$#+.!$"(
!'(+..&-6.!"7(.$(&-&/7&($/7+"!3+%%4(!"(+"($/7+"!=+.!$"(1!.,$*.(7$<
 Innovation and Transformation: A Lifecycle Model • Page 11
An InnovationLabs White Paper

maintenance of the parent, the stress of downsizing if required, and the

support of a new organization.
3. Not realizing that there are two ideas and organizations occupying the
same parent and that they need different treatment, resources, expectation,
dialog and skills. This happens in organizations with formal innovation
processes but it also happens when an innovation is attempting to emerge
organically in an organization without go- ing through a formal process.
Everyone admonishes the innovator to get back to work and drop the silly
idea.
4. Not letting go when the new idea achieves adulthood. Sometimes
innovations are subsumed inside the parent but even in those cases, they
need some of their own space for expression because they’ve likely
discovered a few new rules and the old system will kill them even after
they become viable. Not letting go tends to stunt the growth of the new
idea and distracts or dissuades the parent from getting to work on the next
idea.
5. Cannibalizing resources in either direction can also be destructive. The
offspring can’t siphon off too much from the parent and the parent needs to
avoid the tendency to look to nascent innovations for resources when times
get a little tight.

•••

Summary
The lifecycle model has been used many times to illustrate the growth,
maturity and decay of an organization. The normal-curve product cycle and the
s-curve are both visual examples that have been used to demonstrate life
cycles. In this paper we've used a stylized lifecycle model to visually explore
the dynamics behind innovation: when to innovate, characteristics of the parent
and child organizations, and some uses of innovation in transformation. We've
identified at least five pathologies in transformation efforts. Two of them were
covered at the beginning of this paper.

•••

Your comments or suggestions about this white paper are welcomed.

Please contact Michael Kaufman at mkaufman@innovationlabs.com

InnovationLabs is one of the world’s leading innovation consultancies.

www.innovationlabs.com