The Truth About Innovation
I’ve always been a fan of innovation. I firmly believe that innovation is at the core for all value creation, and that any business that fails to innovate is destined to the ash heap of history. When I speak to groups of CEOs, I regularly talk about the importance of innovation. As a result, I’ve learned that there is very little understanding of what innovation really is. Too often, innovation is considered with new product development or, even worse, new hi-tech applications.
Last week, I came across a compelling article about The 12 Different Way for Companies to Innovate. You should check it out – it’s must reading for anyone who wants to harness the power of innovation for their business.
Here’s some of my favorite excerpts (with my comments in green).
- But what exactly is innovation? Although the subject has risen to the top of the CEO agenda, many companies have mistakenly narrow view of it. They might see innovation only as synonymous with new product development or traditional research and development. But such myopia can lead to systematic erosion of competitive advantage. (Right on the mark)
- Viewing innovation too narrowly blinds companies to opportunities and leaves them vulnerable to competitors with broader perspectives. (Again, right on the mark)
- In actuality, “business innovation is far broader in scope than product or technological innovation, as evidenced by some of the most successful companies in a wide range of industries. Starbucks Corp., for example, got consumers to pay $4 for a cup of latte, not because of better-tasting coffee but because the company was able to create an experience referred to as “the third place.” (This is a great example that executives need to grasp. Starbucks didn’t “invent” anything, but they were one of the most innovative companies in the world – and certainly in their market.)
- Conversely, technological innovation in the laboratory does not necessarily translate into customer value. (Simply put, every great innovation starts when someone looks at the world from the standpoint of the customer and identifies gaps. Everything is just guesswork.)
- To avoid innovation myopia, we propose anchoring the discussion on the customer outcomes that result from innovation, (Hallelujah!) and we suggest that managers think holistically in terms of all possible dimensions through which their organizations can innovate. Accordingly, we define business innovation as the creation of substantial new value for customers and the firm by creatively changing one or more dimensions of the business system. (If it doesn’t create value it’s not worth doing.)
Now my favorite takeaway:
Business Innovation is About New Value, Not New Things.