One of the key capabilities a firm may wish to develop is Innovation. Innovation is more than coming up with inventions or ideas; it is the commercialization of inventions or ideas. Innovation has become a hot topic over the last few years, yet few firms truly understand what is meant by Innovation. Fewer firms can articulate the difference between a radical innovation and a disruptive innovation. Can a Radical Innovation be a Disruptive Innovation? Does it matter? Yes, if your firm aims to build up a competency in Innovation.

For a firm looking to establish its Innovation capability, they will need to master the following capabilities and resources. More detailed information on the following can be found under “Innovation University”.

• Discovery
• Creation, recognition, articulation of opportunities. It involves basic research, internal hunting and external hunting (license, purchase and invest).
• Evaluation
• Is this a bona fide business opportunity? This involves getting company “buy in” to allocate resources such as seed money and people so that a particular idea can be pursued. It is during this stage that the value proposition is defined and a business model is developed.
• Elaboration
• Once the business model has been established and the organization has made a commitment to allocate resources, the new venture team begins to work out many of the details. Activities revolve around market learning, feasibility studies, technical work and market creation. This is the stage when the opportunity is refined and much is learned through trial and error.
• Acceleration
• This generally involves major firm commitment to take this idea into the market place. Often the project is transitioned from a new venture team to a business unit team that will ramp up the business to stand on its own. It involves focused efforts, ability to respond and investing activities.

One can look at the above phases/stages as value adding activities that take place when attempting to commercialize an idea/invention. These value adding activities form the basis for the Innovation Value Chain. Michael Porter proposed that in any value chain the main activities are facilitated by support activities. These activities are depicted as rectangles in Figure 1.

Figure 1 - The Innovation Value Chain

• Human Resource Management
• How human capital is managed and acquired. Do the employees come from existing business units, or are they brought in from the outside. What type of skill sets are needed to commercialize the invention.
• Innovation Infrastructure
• What is the organizational structure that surrounds the innovation activities within a firm? Is there a separate new ventures group that reports directly to the CEO? How is innovation handled within the existing business units?
• Technology Development
• What technology is deployed to assist with the activities? Is idea generation software deployed? What does the IT infrastructure look like?