The Innovation Value Chain for Professional Service Organizations

Innovation Value Chain in professional service organizations

The Innovation Value Chain in professional service organizations consists of idea generation, development, and implementation. The table to the left details what each of these phases entails.

To be great at innovation, a professional service organization needs to excel in each of these phases.

Innovation funnel

The innovation process is also often depicted as a funnel, with many projects going in and few coming out. The attrition rate of ideas is indeed high in the innovation process. Having many ideas drop out in the idea generation stage is a good thing, as it illustrates that you have an abundance of creativity.

With Generative AI, idea generation is no longer the bottleneck. In many firms, the opposite problem is emerging: too many AI ideas and not enough structure to evaluate which ones are worth pursuing. Without a clear process for selecting and prioritizing opportunities, organizations risk overwhelming their development capacity with initiatives that never reach implementation.

Having many ideas drop out during development is less advantageous. It is okay if projects fall out early in the development phase when part of the fail-fast-to-succeed-sooner mantra.

AI development projects also introduce new complexities to the development phase. A promising AI prototype often works well in a controlled environment but struggles when applied to real client work. Data quality, verification requirements, and workflow integration can all slow down progress. As a result, many AI initiatives stall in development—not because the idea was bad, but because the path to practical use was not clearly defined.

In the implementation phase, the new offering needs to be implemented and scaled. To achieve scale, colleagues probably need to be trained in how to adopt the innovation or new service offering. With AI, each adoption becomes a behavioral change, not just a technical deployment. Without incorporating a learning process, even powerful AI tools remain underutilized.

Each of these adoptions is typically a mini-repeat of the innovation project. Because these are knowledge-intensive and complex applications, each adopting professional has to learn how to apply and adapt the innovation to new circumstances.

The ideal funnel in professional service organizations should, therefore, look something like a bowtie:

Waste of resources

However, in most professional service organizations, the funnel actually looks like a church dome on its side, with too few projects going in, too many going into the development stage, and too few getting implemented:

The trouble is the tremendous waste of effort and funds this funnel represents, with minimal impact. In the end, only implemented new services will give you a return on investment.

If so few innovations get implemented, why try to develop so many? Alternatively, if many innovations get developed, why not diffuse them better and get more bang for the buck?

Having projects continue in limbo is a costly mistake. If projects that slowly disappear from everyone's radar screen have received significant seed funding, your vetting process is not good enough.

Counting and tracking all ongoing innovation projects is the first step to analyzing what your funnel looks like. How many projects do you have in the idea generation, the development, and the implementation phases? For the selected time frame, count all projects - those ongoing, but also those that ended for whatever reason. Once you have this data, you can start to identify opportunities to improve, so you can get more done with the same resources.