The difference between Core and non-core innovations (part 1/3)

In this series of articles I will discuss the difference between core and non-core innovations and how to deal with this successfully. In the first part I discuss what exactly the difference is. In the second part, I look at why it is so difficult to get a successful non-core innovation to land in your own organization. In the third and final part, I propose an approach to do this better.

When we talk about innovation, everyone has a different understanding of it. For one it is innovation if, for example, we make our product 20% faster/better/thinner/cheaper, for another it is about the application of AI within the organization.

This often involves a difference between core and non-core innovation. In this article I will go deeper into the distinction between the two, with the Core-Non Core model being central. If you know how to distinguish between these two types of innovation, you can take steps to increase the innovation excellence of your organization.

To do this first a bit of context..

The 3 Horizons model

The 3 horizons of innovation are used as a model to distinguish between the different types of innovation. The exact boundary between the horizons is sometimes difficult to determine. The following picture can help:

The boundary between the horizons is determined by whether we already know something well, whether it is new to us, or new to our industry/the world. In addition, we look at new technology and/or solutions on the x-axis. On the y-axis we check whether the market and/or customers are already known.

H1: Horizon 1 
Horizon 1 is incremental innovation or improvement/ renewal. Technology, solutions, market and customers are well known. The focus is on efficiency and doing things right.

H3: Horizon 3
Horizon 3 is the distant future. Technology and solutions are virtually unknown. It can also involve completely unknown markets or customer groups. The focus in this horizon is on learning what works. How can we use new technology in our context?

H2: Horizon 2
Horizon 2 is in between. The technology or solutions are known, but not yet within your organization. Market and customers are not new, but they are for your organization. There is a good idea, but how to market it is difficult to determine. Focus in this horizon is on discovering new business models.

Ho: Horizon 0
This is our own addition to the model. Every innovation aimed at improving the internal organization falls under Horizon 0.

The Exploration – Exploitation model

When we develop products, we move on a timeline that leads from more to less uncertainty. We call this the explore-exploit continuum.

- Explore / Exploration
Exploration activities relate to searching. Look for ideas that are turned into value propositions that are relevant to customers. And that can be embedded in a scalable and profitable business model
- Exploit / Exploitation
Operating activities relate to growth. This involves scaling new business models and improving or reinventing existing business models.

In the picture below from Strategyzer it is illustrated how the product development phase takes place in the Explore part, after which (if all is well) a transfer takes place to the Exploitation zone.

The Core-Non-Core model

In the Core-Non-Core Model we combine the perspective of the Horizons with the Explore-Exploit Model. We have also learned from our consultancy practice that a distinction between 2 types is sufficient.

Based on this simple model, you can divide the development portfolio into 2 categories.

Core vs Non Core

CORE
Products/services that fall under Core are relatively certain and have a higher chance of success. They can be developed through the regular product development process and find a landing spot in the organization. We look at either employees or existing target groups. The technology you use as an organization is already known or is the new generation. As a guideline, we apply the boundary of less than 20% of new technological elements in the entire proposition. Core equals Horizon 1 + Horizon 2 Light.

Core can include both exploitation and exploration. Exploitation then relates to Life Cycle Management, while new propositions fall under Exploration.

NON CORE
Non-Core Innovation are products, services and business models that feel further away from our core business. There is more uncertainty. This uncertainty is related to technology, business model, new target groups or how stakeholders will react. As a guideline, we use that there are more than 20% new elements (now broader than technology!) in the entire proposition.

This is the area that you as an organization should pay more attention to in order to build on your innovation excellence. Non-Core is equal to the more innovative Horizon 2 and Horizon 3. Non-Core trajectories are by definition Exploration trajectories.

We also make a distinction between external and internal:

External: these are products, propositions and business models aimed directly at our customers and/or users
Internal: these are improvements and innovations aimed at our employees. Here too we can distinguish between core and non-core. Consider, for example, an update of Office (core) or the introduction of a new reward system (non-core)

Core bridge and non-core crossing

What happens in practice is that the Core activities can be absorbed fairly easily into the operating organization after realization. A “core bridge” is available to ensure a safe landing in the Exploitation Zone.

However, for the Explore projects (non-core) that route is a lot more complicated. I call this the non-core crossing. To this end I made the following illustration (note the puppet that is about to drown and the shark swimming around!).

Application in practice

The first step of the model is awareness: what is Exploitation for us and what is Exploration? As we have seen in the second illustration, the transfer from Explore to Exploit goes wrong.
1. Being aware of the difference between core and non-core activities makes it much easier to assess certain problems from the right perspective.
2. You now know that Explore initiatives involve some transfer risksHow does your organization deal with this?
3. Differentiate in working method/process:Activities that focus on the Core require a different working method than Non-Core activities. They also need to be controlled in a different way.
4. Differentiate in personality types. It is for a reason that the Explore block is “yellow” and the Exploit block is “blue”. The reality is that another type of person likes to work in the Explore or Exploit continuum. It is wise to take this into account.

In the next part “7 reasons why a successful non-core innovation does not become a success: the transition from exploration to exploitation” I explain why innovations that are close to an organization's current product range succeed and non-core innovations fail. There are 7 reasons why non-core innovations are struggling.

References
– The 3 horizons of innovation – Pimcy
– Innovation Excellence – Pimcy
– Explore-Exploit – Strategyzer
- Color Insights Discovery