“An innovation is one of those things that society looks at and says, if we make this part of the way we live and work, it will change the way we live and work.”
– Dean Kamen, Inventor of the Segway and Founder of FIRST
While innovation might be one of the most overused words it is critical to the sustained prospects of your organization. While most people think about innovation as a tool used predominately by high-tech companies, you’ll be surprised by how much innovation is probably happening right in your backyard, in your own market if you really looked for it.
Bottom-line, if you don’t embrace innovation and try to figure out how to incorporate more of it into your organization, your competitors most likely will, and in due time, you may be at a distinct disadvantage. So, let’s go over all of the different types of innovation and the best practices.
What is Innovation?
Innovation involves new and unique improvements to current designs and methods or entirely new designs and methods. There are many different types of innovation, including:
Technological advancements typically permeate across or create new industries and markets. For example, Gore-Tex, the first waterproof and breathable fabric, forever changed the outwear industry. For many industries, the innovation of GPS (Global Position System) and the emergence of location-based services have been foundational technology. It’s good practice to monitor foundational technology innovations as they can quickly change the competitive dynamics of a market.
Design innovation enables new use cases, and new users, or dramatically improves the customer experience. The Apple iPhone simplified the design of complex technologies to a level that even 3- to 5-year-olds can use. Go Pro’s innovation in rugged and wearable portable cameras enabled athletes and adventurers to capture new perspectives. Design innovation can quickly redefine the paradigm of a market and bring new use cases and users to a mature market.
Business Model Innovation
Business model innovation utilizes unique elements and combinations of a business model to differentiate the value proposition and competitive advantage. Southwest is a poster child for business model innovation. They created the lowest cost structure in the airline industry (at the time), by utilizing second-tier airports, a point-to-point network rather than a hub a spoke, not assigning seats, standardizing operations with the use of one type of plane, the Boeing 737, making employees owners, and doing pretty much everything counter to the traditional practices of the airline industries. Tire Rack is another one following business model innovation, trying to disrupt the traditional tire and auto repair market by creating the best online customer experience to purchase tires and services and operating four national distribution centers that can ship tires and parts to their installation partners spread across the US within 24 hours.
Service innovation includes novel and effective improvements to the customer journey. The blended use of self-service kiosks and agents in the airline industry eliminated wait times, improved service levels, and reduced costs. User-generated Q&A is another service innovation, which has allowed organizations to have customers answer other customers’ questions. Crowdsourcing and crowdfunding innovation is redefining markets, with the likes of Uber, Kickstarter, Airbnb, and others.
Process innovation typically involves step-function improvements in the efficiency and effectiveness of processes. 3D Printing has dramatically improved the design process for manufacturers allowing them to quickly prototype and iterate designs. Robotic innovations are enabling the automation of practically every type of physical process. And SaaS technologies have innovated almost every cognitive workflow within companies.
Component innovation can enable product innovation. In designing and developing their electric cars, Tesla didn’t use the typical Nickel Hydride Metal (NiMH) batteries used in hybrid cars. Instead, they utilized lithium-ion batteries, primarily used in laptops. Their logic was to leverage the economies of scale of the billions of laptop batteries produced a year and the significant R&D investment to make laptop batteries more efficient. While Tesla, invested hundreds of millions to perfect putting over 5,000 batteries together in a car, they definitely tapped into component innovation.
Why is innovation important?
People often think about innovation in the wrong way. They think that innovation is only for technology companies or big companies with a large R&D budget. They are missing the big picture that most innovation in a company is leveraging existing design, technology, service, process, and component innovation from other organizations. Not keeping up with and integrating into your organization the key and core innovations affecting your industry or others is a surefire way to lead your organization down a path of irrelevance. While internal and proprietary innovations are a great source of competitive differentiation, not adopting core innovations created outside your organization is a source of competitive obsolescence.
How do you innovate?
There are more innovation methodologies and consultants than the world needs. Innovation typically comes down to creatively applying what already exists in the world to your organization. Just like a good strategy, a good innovation comes down to correctly defining the problem you’re trying to solve, creating impactful and innovative options, prioritizing them, and executing them. Typically the hard part is creating more and better innovation options.
Innovation, as a thought process, comes down to blowing up the current constraints of today and imagining a different and better future. Here are some ways to imagine a different and better future:
Make it Everyone’s Job
As Gary Hamel, one of the world’s foremost thought leaders on innovation would say, “you have to make innovation everyone’s job.” In many companies, developing innovations is framed as just a few people’s jobs such as the CEO, product development leadership, and gurus. Though, some of the best innovative ideas or applications are developed on the front lines, and all across and at every level of an organization. Creating the free and seamless circulation, prioritization, and execution of those innovative ideas is key to building an organization brimming with innovation. You can also think about integrating Kaizen philosophies into your organization.
I’ll assert that the majority of product and service innovation is simply taking innovations and designs from one industry, market, or use case and applying them to a new industry, market, or use case. These types of innovations are effective because they’ve already been proven.
Keep up with Technology
So many organizations fail to keep up with the technological advancements that are underpinning the foundation of technological, service, process, component, business model, and design innovation. It is a strategic imperative to keep up with and adopt innovation to stay with or ahead of the competition.
Be a Fast Follower
While sometimes it is critical to be a first mover, especially if there are high barriers to entry or scarce resources, typically with innovation and technology the safer bet is to be a fast follower, adopting an innovation and technology right after the first movers have worked out the kinks, learning curve, adoption, and costs. Being a fast follower typically allows for quicker, easier, cheaper, and higher adoption of innovation and technology.