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The Innovation Value Chain for Professional Service Organizations

The innovation process is an Innovation Value Chain, consisting of idea generation, development, and implementation. The process is as strong as its weakest link. If you are great at idea generation but not so good at development, very few of your brilliant ideas will come to fruition. To be an effective innovator, you need to be good at all phases in the value chain.

The Innovation Value Chain

The concept of the Innovation Value Chain was brought up in 2007 by Hansen and Birkinshaw. In their Harvard Business Review article, the authors explain why innovation is a chain of events and how you can assess the strength of your organization in these chains and in each link. This blog applies their idea to professional service organizations.

Innovation value chain tableInnovation 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.

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.

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. 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:

Ideal innovation funnel PSO

Waste of resources

However, the funnel in most professional service organizations often in reality 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:

Typical innovation funnel PSO

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.

What an Innovation Value Chain analysis does, is help you answer these questions. It assesses the weak areas in your innovation process so that you can improve it and reach your maximum potential with the same level of effort and funding.

Counting and tracking all ongoing innovation projects is a first step to analyze 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.

If you are having questions while creating your pipeline overview, or if you are interested in learning how to improve your innovation process and maximize its output from there, please contact us. We gladly assist you.


Hansen and Birkinshaw 2007 The Innovation Value Chain, Harvard Business Review