Rather than an integrated process where risk is distributed evenly from beginning to end, innovation is a series of discrete steps whose risk and role in the innovation process can be highly different. Failing to look at parts of the innovation cycle in discrete terms and integrate them with appropriate internal and external resources often causes innovation processes to result in less than optimal results. Fractional entrepreneurship models can help overcome these challenges, exploit discrete innovation step opportunities, lead to more efficient combinations of different innovation pathways and make the innovation process more resilient.
Innovation Cycles and Discrete Innovation Steps
While at times thought of as a flash of insight, in reality innovation is more often than not an extended process that can last for months, years or decades. This process can assume a great number of directed or impacted paths which can take forms that are linear, circular, comprised of steps backwards and forwards or highly disjointed. Innovation can also be the unintended consequence of the collision between different types of orchestrated or highly unrelated processes or events.
Independent of the form it takes, the innovation process can be viewed as a connected set of discrete components that interlock to different degrees and contribute to an overall innovation outcome. How efficiently they do this depends on different factors, including the persons involved at different stages of the innovation process, the resources they have, the degree to which those stages are connected with prior or subsequent innovation steps and the internal and external innovation environment.
The innovation process can be viewed as a connected set of discrete components that interlock to different degrees and contribute to an overall innovation outcome.
The specific combination of factors required at each stage of the innovation process to maximize the likelihood of innovation success are not the same. At some innovation stages, the imposition of a rigid organizational structure on an innovation cycle may enhance progress while in others it may dramatically hinder it. At some stages, significant participation of a large degree of stakeholders may accelerate the innovation process while at other times may cause it to completely break down. Because it is highly unlikely that any single innovation environment is designed to support or can adapt quickly enough to reflect these different innovation process needs, innovation cycles have a high probability of failure.
For example, a large company with a highly bureaucratic structure and conservative corporate culture may not be well equipped to think of or evaluate highly disruptive solution visions or solutions that come from lateral sectors or perspectives at the early stage of the innovation process. However, this same company may be extremely well positioned to drive the innovation process forward once the viability of the proposed innovation solution becomes clear and the pathway for implementing it is defined.
Similarly, innovation teams operating in an unstructured innovation environment may be able to quickly generate, explore, discard and produce new iterations of highly creative potential solution paths. However, these same individuals may lack the ability to evaluate the interconnection between the proposed solution and the market and not have the human, financial and technological resources to maximize the idea’s potential.
Differences in the relative strengths of these innovation environments generate innovation inefficiencies that have significant negative internal and external impacts. Internally, companies with inefficient early-stage innovation processes may lose faith in innovation as a corporate value driver and redirect corporate resources to other types of activities, such as reducing costs or increasing sales of existing products. Conversely, entrepreneurs with inefficient later-stage innovation processes may struggle to get market and other types of traction which can dramatically extend the innovation cycle and force entrepreneurs to pass through long valleys of resource scarcity. In both of these cases, innovation cycle efficiencies not only have negative consequences for innovation teams; they also result in lost opportunities for sectors and economies as a whole.
Fractional Entrepreneurship
One way to address inefficiencies in company-led and entrepreneur-led innovation processes is through fractional entrepreneurship models. Fractional entrepreneurship refers to entrepreneurial objectives that target, rather than the entire innovation cycle, specific parts of it where specific innovation resources that are at hand can be put to most efficient use. These parts can then be made to interlock with other parts of the innovation cycle with different sets of innovation resources. The net result of this process can be faster innovation cycles, decreased waste of innovation resources and higher innovation impact.
Fractional entrepreneurship refers to entrepreneurial objectives that target, rather than the entire innovation cycle, specific parts of its where specific innovation resources that are at hand can be put to most efficient use.
Three key components of fractional entrepreneurship are innovation distances, flexible innovation directionality and shared innovation ownership models.
Innovation Distance. Fractional entrepreneurship is focused on much shorter idea or project development time spans and may carry an idea only a short distance from one part of the innovation ecosystem to another. For new ideas, this may involve taking an idea only a short way down the viability analysis path and, once evidence of viability has been sufficiently gathered, transferring the idea to or sharing the idea with another party. For established market data, this could involve simply involve taking a certain set of market insights and bringing those insights to a party who can build a business model based on them.
Fractional entrepreneurship is focused on much shorter idea or project development time spans and may carry an idea only a short distance from one part of the innovation ecosystem to another.
For example, a company that engages in a significant amount of M&A activity may want to accelerate its analysis of potential targets with technology but not know what technology could be used to do this or how to implement it. Buying another company with this technology is a common option, but finding a company with the right technological fit and negotiating and closing the acquisition of that company may take a significant amount of time. Further, a range of post-acquisition issues may slow the adoption of the targeted technology. To avoid these issues, the company could commission the external development of technology or a commercial initiative to the point where the company can make a reasoned decision about whether or not to proceed with the innovation process.
On the other hand, an entrepreneur at any early stage of developing technology to improve M&A analysis could bring that technology to different companies or investment funds engaged in activity and offer to either sell it to them or develop it further.
Flexible Innovation Directionality. A second characteristic of fractional entrepreneurship is flexible innovation directionality. In what might be thought of as a traditional innovation model, an entrepreneur starts with an idea and through successive iterations builds the idea into a fully operating business. This often involves the steps of coming up with an idea, testing it, converting it into a product and launching the idea into the market.
However, this ground-up approach is not the only pathway that the innovation process can take. As suggested earlier, innovation can start with some set of actionable market insights and then iterate backwards into business models or ideas. Given increasing amounts of data regarding consumer behavior and technology that can extract that data from market activity, it is highly likely that backwards- driven innovation models will occupy larger and larger portions of innovation activity.
Rather than being limited to forward-looking innovation processes, innovation can start with some set of actionable market insights and then iterate backwards into business models or ideas.
Further, innovation can also occur laterally. Lateral innovation paths can also come from directions, organizational departments or people that are often underrepresented in classic innovation ecosystems, such as for example company workers that are not part of traditional corporate innovation centers. Workers in companies often see the operational details of a company at very close range, and this can allow them to have a deep understanding of things they are not working well and make suggestions as to how those things might be fixed. This type of ground-level vision may not take into account larger components of the problem or what types of solutions would be best able to address that problem given a company’s organizational structure and available resources, but they may contribute significantly to the overall innovation process. Lateral innovation paths can come from outside as well as inside the firm.
Innovation Ownership. A third characteristic of fractional entrepreneurship is more flexible forms of economic ownership. In traditional entrepreneurial models, the entrepreneur carries the vast majority or all of the economic risk, particularly at early stages of the innovation process, and also receives the vast majority of the economic benefits if the venture is successful. However, given limitations in single entrepreneur-led innovation processes, this can result in inefficient matching of innovation resources with innovators meaning that innovators can have the least amount of funds when they need them the most, resulting in less than optimum innovation outcomes. With fractional entrepreneurial models, such as those where risks and rewards are spread out more widely across the innovation ecosystem, innovation resources can be more effectively used.
Conclusion
Given the power of technology to create competitive advantages, more and more companies and individual entrepreneurs will very likely need to begin experimenting with more creative and expansive innovation models to reach out to greater areas of the innovation ecosystem. As part of this process, fractional entrepreneurship models will likely prove to be a very useful way to more efficiently distribute innovation resources across different innovation pathways and reduce limitations that exist in non-discrete innovation processes.