Choosing where to innovate

The business decision network exposes all the decisions creating value for the business, making it easy to see where innovation might create or enhance value for the business. Types of innovation are identified by the type of decision being made. For example, a target market decision would be the source of market innovation opportunities. Similarly, a brand strategy decision would lead to brand innovation opportunities.


The innovation frameworks above focus on different elements already included in the decision framework

• Category lifecycle points toward which decisions in the business strategy are likely to generate value for a product or service category.

• Industry patterns suggests decision groups that might generate new value in a given industry.

• Impact or scope suggests the potential change impact innovative decisions can have on the business. Innovation in strategic decisions will have greater impact, while changes lower in the network are more likely to generate incremental value. In either case, the decision framework enables an evaluation of potential impact, including positive or negative changes to current markets, profits, or competition.

• Internal or external focus is a consequence of which strategic decisions are considered when innovating. For instance, choice of a strategic partner would imply an external focus.

• Innovation measurement is enabled by the decision network where outcomes can be traced to the sources of innovation, the decisions that created new or sustained value.

When using a decision network as an innovation framework, each decision provides the basis for creating ideas focused on a real business problem, making each idea a potential innovation.

Choosing where to innovate

Finding new opportunities to innovate and create value is often a routine expectation of research and development. However, the types of innovation exposed in the frameworks above suggest multiple sources for innovation across the business, function, organization, or industry.

Ultimately, value is created in the decisions made for the business. A decision framework provides the complete environment for innovation. It simultaneously identifies the type of innovation, along with the context to evaluate the potential value, impact and scope needed to make an effective investment choice.

Coming up next: Disruptive Innovation Stories from India

Innovation & Types

There are many different types of innovation but the two most popular types amongst innovation specialists are incremental innovation and radical innovation. This can be further classified as 


• Incremental: Sustaining & Break-through
• Radical : Disruptive & Transformational. 


Here are the definitions to make the concepts clear:


Sustaining products and services are the kinds of innovations companies often need to develop just to stay in the game. These incremental innovations can be thought of as variations on a theme. For example, in the category of household cleansers, a sustaining innovation might involve making the cleaning agent 10% stronger or pairing it with a new scent.


Breakout offerings are those that significantly up the level of play within an existing category. The sleek Motorola Razr, with its boundary-pushing design, was a runaway success for Motorola. Seeing it, customers couldn’t help but want it--over time making it the best-selling line of clamshell phones ever. That said, it was still a clamshell phone, sold and used in much the same way as previous cell phones.


Disruptive innovations are the sort of big ideas that many of us have in mind when we think about an innovation. They are called disruptive because they disrupt the current market behavior, rendering existing solutions obsolete, transforming value propositions, and bringing previously marginal customers and companies into the center of attention. The iPod, which radically changed the way we listen to and buy music, is one such innovation.


Transformational is the most difficult because it changes the way we live and often makes big companies, even whole industries, obsolete in a short period of time. Most organizations are loath to pursue ideas that will make themselves obsolete. Unfortunately, this is one of the reasons that they die. The computer and entertainment electronics industries have been prime examples of this. How many of us have audio 8-track machines, cassette players, videotape cameras, recorders and players, bag phones, clunker desktop computers, etc. sitting in our basements? In most cases transformational innovation starts in someone's "garage;" by a visionary outsider. It rarely happens within the walls of an organizational structure.


Breakthrough innovation falls between incremental and transformational on the innovation spectrum. It requires significant change on the part of the innovating organization, both in terms of cultural and systems support. It creates true competitive advantage for a sustainable although increasing shorter period of time and it involves significantly more risk-taking, which is why the decision-making that results in true breakthroughs must in many ways be the opposite of the decision-making that supports incremental innovation. It must be sponsored at the top. Breakthrough ideas create new markets and business opportunities that did not exist before. Therefore, there is no "frame of reference" upon which to deliver the metrics called for by a Stage Gate process. Customers don't have a frame of reference by which to easily judge the idea, business analysts have no track records - no sales numbers, no relevant trial or repeat data, etc. upon which to build volumetrics. For this reason breakthrough needs the higher level of consideration and judgment.


If transformational innovation sits at one end of the innovation spectrum, then the opposite end is Incremental Innovation. This is the kind that most of us are used to pursuing. It focuses on the kinds of improvement that keep a product, brand or company in the game. They tend to be line or brand extensions, new bells & whistles, new packaging, new improved ingredients, etc. In fact, an Advertising Age innovation study several years ago concluded that over 60% of innovations claimed by the consumer products industry were nothing more than packaging improvements. Nevertheless, it is instrumentalism that fuels most of the competition experienced in any industry. And it is this type of innovation that requires:
• Multi-disciplined, cross-functional collaboration
• Strong, definable metrics at each decision-making point 
• Consensus-based decision making between multiple stakeholder functions
• Internal competition for people, money, and operational resources, such as: R&D
• Packaging development
• Qualitative and quantitative market research
• The interruption of production lines for short, unprofitable test market runs
• Distribution channel support in small test market geographies where channel competition is fierce enough for the established brands (who has the bandwidth to push the new ones [sales] or hear about them [buyers])
• Promotional and advertising development, etc.


The amount of resources that are made available for this type of innovation are almost always tied to current business performance; available in the good times and one of the first things to be cut in the bad times (right after the ad budget).


NOT ALL INNOVATIONS PERFORM THE SAME


Because disruptive innovations have the potential to yield the greatest benefit to a company, firms often make the mistake of thinking that disruptive products should lead to immediate market success. Even worse, some firms unwittingly begin to classify their products purely on the basis of their immediate market forecast, calling likely big hits “disruptive.” In fact, the opposite is true. Because disruptive offerings differ significantly from the status quo, they often test poorly and require time to gain market acceptance. Indeed, one should actually be suspicious of so-called disruptive innovations that show immediate widespread success.


The typical profile of revenue performance is:


• Sustaining: Immediately moderate, then tapering off.
• Breakout: Rapidly strong, then quickly dropping to a lower level.
• Disruptive: Longer gestation period leading to exponential growth.


There often tends to be confusion between innovation (the ability to make new things actually happen) and creativity (the ability to have original ideas / see a different way of doing something).


Creativity is the thinking, innovation is the implementation.


Innovation is not just about brand new products. There are many places where you can be innovative and often the context helps define innovation.

How to be Creative - Quick Tips!

I couldn't but help myself from putting this post together.

Got to know about a very interesting book : "Imagine: How Creativity Works" written by journalist Jonah Lehrer. Lehrer has actually helped to disseminate what scientists know about creativity. In fact, in March 1st week, 2012 Wall Street Journal, his article “How to be creative” took up the entire front page of Section C and another full page inside the section.

Let’s take a quick look at Lehrer’s “10 Quick Creativity Hacks” from the WSJ article.

1.       When you’re in a blue room, you’re more creative.

2.      You’re more creative when you’re a bit groggy.

3.      People who daydream more score higher on creativity tests.

4.      If you imagine yourself as a 7-year-old, you have more ideas.

5.      Watching a comedy video makes you more creative just afterwards.

6.      If you think the creativity puzzles come from another country or state, rather than your own local university, you’re more creative.

7.       Use more generic verbs to describe your challenge.

8.      If you sit next to a box (but not in it) you’re more creative.

9.      Students who’ve lived abroad are more creative.

10.   When people move to a bigger city they become more creative.

It’s true that these 10 tips are based in research studies. But it’s good to be a bit skeptical, because most of the studies used paper-and-pencil creativity tests that have only a limited relationship to real-world creativity. It makes me think of a study published a couple of years ago that found that if you stare at the Apple logo, you score higher on a creativity test than people who stare at the IBM logo. Does anyone really believe that simply looking at an Apple will make you more creative in any meaningful way? Not me.

Successful creativity results from hard work over a long period of time, from a systematic and deliberate process that raises the ratio of success to failure. Lehrer knows this too, of course.