What is Innovation?Edit
Many companies take a mistakenly narrow view of the definition centering on just technological advancements and/or traditional investment in R&D. The authors suggest three broad characterizations of “business innovation”:
- Business Innovation is About New Value, Not New Things: It makes no difference how innovative a company thinks its new product is. What matters is whether customers will realize it and pay for it.
- Business Innovation Comes in Many Flavours: Innovation can take place on any dimension of s business system. Example: Home Depot innovated by targeting the underserved “do-it-yourselfer” customer segment, while Cisco improved profitability through process innovations.
- Business Innovation is Systemic: When innovating, a company must consider all dimensions of its business system.
What are the Dimensions of Innovation?Edit
The authors have laid out 12 “dimensions of innovation” mapped on an “innovation radar” anchored by a company’s offerings, who their customers are, the processes it employs and where it’s touchpoints are.
- Offerings: A firm’s products and services; innovations here require the creation of new p&s that are valued by consumers
- Platform: A set of common components, assembly methods or technologies that serve as building blocks for products & services. Platform innovation involves using modularity to create a diverse set of derivative offerings more quickly and cheaply than if they were stand alone items.
- Solutions: Create integrated and customized offerings that solve end-to-end problems. Creates value for customers through the breadth of assortment and depth of integration of different elements.
- Customers: To innovate along this dimension, the company can discover new customer segments or uncover unmet needs. Ex. Virgin Mobile moving into the US by focusing on consumers under 30 using simplified pricing, stylish phones and brand irreverence.
- Customer Experience: To innovate here, the company needs to rethink the interface between the org and its customers. For example, Kaiser Permanente’s efforts to create more comfortable waiting rooms, better directed lobbies, larger exam rooms.
- Value Capture: To innovate here, the company can discover untapped revenue streams, develop novel pricing systems, etc. Example, Edmunds.com use of a variety of revenue streams, from advertising to licensing its tools and content.
- Processes: To innovate along this dimension, a company can redesign its processes for greater efficiency, higher quality or faster cycle time.
- Organization: Organizational innovation involves rethinking the scope of the firm’s activities as well as redefining the roles, responsibilities and incentives of different business units.
- Supply Chain: To innovate here, a company can streamline the flow of information through the supply chain, change its structure or enhance the collaboration of its participants. Ex. Zara- we all know the deal there.
- Presence: Innovation here involves creating new points of presence or using existing ones in creative ways.
- Networking: Innovations here consist of enhancements to the network that increase the value of the company’s offerings.
- Brand: To innovate here, the company leverages or extends its brand in creative ways. Example: easy-Group licensing its easy brand to dozens of other industries on its brand promises of good value and simplicity.
True innovation should innovate on several of these dimensions (think Apple’s iPod which provided solutions for its customers, content owners and manufacturers). Research to date supports the notion that successful innovation strategies tend to focus on a few high-impact dimensions, rather than attempting a shotgun approach along many dimensions at once. Ultimately, the innovation radar could guide the way companies manage the increasingly complex business systems through which they add value, enabling inno- vation beyond products and technologies. In doing so, the framework could become an important tool for corporate executives, entrepreneurs and venture capitalists — anyone seeking growth through innovation.