“Moving at the speed of business” is a phrase often used to refer to the growing pace of today’s world. It is also a catch-phrase for the added competitive pressures companies face from changing trends in their markets. History is full of examples of companies that “didn’t get the memo”. Nokia and Blackberry both failed to understand the evolution of the mobile device and paid dearly. Apple, on the other hand, was at its forefront and continues to reap the rewards.
But not all changes lead to competitive advantage; even for those that do, the advantage can be short-lived. So how do you separate the signal from the noise and identify changes that are truly innovative?
A definition is a good place to start.
In its most rudimentary meaning, innovation is the introduction of something new—an idea, a device, or a method. But new doesn’t always mean better and innovation shouldn’t just be about chasing shiny new toys. For businesses, innovation isn’t really about the innovation itself, but the impact that it has on the top-line, bottom-line, and/or brand.
An Innovation Model
Clayton Christensen of the Clayton Christensen Institute has written extensively on the subject of innovation and has developed an effective framework to identify and classify innovations and he understands why some companies can leverage innovations while others can’t. His work is foundational in our model.
The first step in any model is to define your objectives. Our approach has two: the type of innovation and its impact.
Innovation can be viewed as one of two types:
- Sustaining Innovations are about incremental improvements. These are the classic faster, better, cheaper value propositions that dominant almost every market. Sustaining innovations are the most common, even if they are not the most exciting.
- Disruptive Innovations are about moving into markets that were not served or underserved. They are the Star Trek of innovations – going where no one has gone before. These are not as common, but they drive new markets.
Innovations can take many forms, but ultimately can be summarized as a combination of impacts to following three categories:
- Who: The innovation impacts who can consume the service by reducing barriers of adoption through changes in the consumption model, the target consumer, and/or the price of the service. Examples include developing the ability to support BYOD initiatives to reach mobile users.
- What: The innovation changes the service itself by improving the service, extending the functionality of the service, or defining an entirely new service. Examples range from the move to MPP databases for business intelligence to the explosion of Hadoop and the NoSQL eco-system.
- How: The innovation impacts how the service is actually provided, either through its delivery, the licensing model and/or on-goings operations. The cloud is a prominent example of an innovation that changes how services are provided.
A Company’s Innovation Profile
There is an old saying that you can lead a horse to water, but you can’t make him drink. So it is with companies and innovation. The ability or inability of a company to innovate can be found in their processes, their values and their resources. This combination creates the company’s innovation profile.
- Resources: The resources of a company include both knowledge resources and physical resources. Knowledge resources include the experience and expertise of its people, intellectual property, company history, and corporate data. Physical resources include things like budget, buildings, equipment, and technology.
- Values: The values of a company are more than just its ethics; it is about how employees make decisions and set priorities. Values define the cost structure and/or the business model for a company. They drive how companies invest their resources and determine the desired outcome of those investments.
- Process: The processes of a company are the means by which the resources are deployed to create value. It is not just about manufacturing goods and services, but everything about how the business is conducted day-to-day. This includes the interaction and communications between the various groups.
It’s not about being “smart”. It is about being willing, able, and ready to accept change. With change comes risk. And every company deals with risk differently. As a wise, albeit fictional, karate master/philosopher/gardener once said: “First learn walk, then learn fly”. While innovation can add wings to your bottom line, you must first understand the steps required to embrace it.
Tim Coats and Mark Campbell are both Architects on the Innovation Team at Trace3