We all know the question, but who knows the answer? I got asked it again this week which is what made me try to capture this point. The most common response would seem to be ‘I will know it when I see it’, which suggests business success is based on ‘getting lucky’. As you might expect business schools don’t agree with this and as A G Lafley, author of several works on the topic comments: “Innovation is risky, but it’s not random. Innovators have a disciplined invention process”. So if it is a disciplined process, what steps are parts of the process? Let’s start with the whole point of innovation with a commonly accepted definition: ‘By focussing on our chosen innovation type for this particular market category within this defined scope of time, we will so outperform our competitors that prospective customers and partners will cease to regard them as legitimate alternatives’. Notice the opening part refers to a chosen innovation type and that can broadly be defined around three possibilities:
- Changing the COST of production to such an extent that a clear and substantive advantage can be obtained and maintained. This is the traditional role for information technology, centralising and redefining processes in such a way that costs are reduced, efficiency improved and enterprise assets are better leveraged.
- Creating new VALUE through products and services that redefine markets and tap into whole new opportunities. Apple iPods displaced Sony Walkmans which in turn had displaced transistor radios as an example. For many companies this is the ideal but in reality it’s not that common.
- SERVICING existing customers and markets with such increased intimacy and understanding that competitors find themselves shut out of consideration. Amazon’s original entry into the book marketplace signalled a radical change in the definition of what a buyer expected from a seller in terms of availability, help to find and assess how good particular books are, etc.