The Innovation Blog

I've just returned from an incredibly stimulating four days with one of the worlds premier packaged goods companies.  As with many of our clients, their ultimate objective is to transform their innovation efforts and culture in ways that will dramatically enhance their ability to stimulate growth.

As we are finding time and again, one of the critical stumbling blocks to innovation is the lack of a common language regarding innovation -- basic terms that are shared by all within the enterprise to discuss what they are working on, how to classify it, and therefore how to make resource decisions between options.

In our experience, and again in this session, it has been proven that an enterprise needs at least five basic definitions in order to succeed.  These five definitions must form the common language for discussion of innovation, goal setting and decision-making.  The five key definitions are:

1. Innovation what is it?  Is it new products and services, or is it more.  Do we expect innovation in core processes? business models? go-to-market strategies? etc.  
2. Incremental (or sustaining, or core) innovation.  The base level.  How do we define the minimum ante?  And therefore, what do we expect from riskier, larger opportunity efforts?
3. Breakthrough Innovation.  Larger opportunities that will significantly grow our business or our franchise with the customer?  Efforts in this area require different approaches, different decision tools, and normally, different resources.
4. Transformational innovation.  How do we differentiate the really huge, long-term types of innovation that truly transform not only our business, but the world?
5. Platforms.  Because platforms are often part of the differences in definitions, we need to understand what we mean by a platform.

One of the great things about being an innovation consultant, working with Fortune 500 firms is that I get a chance to participate in conversations and debates over things like this with a wide variety of smart and experienced people.  So I always learn something new.  That was the case again last week.  The experience has helped me to add clarity to my thinking about innovation terms, and hopefully to help others by sharing some of that learning.

The key to innovation definitions is not what others in the world say or think.  It is about creating a language that works for the unique organization in which you are operating.  It's not enough to create these definitions, they must be recorded, leadership must be aligned around them, and they must be communicated.  Most importantly they must be useful distinctions that fit your unique needs.  So here is my latest thinking based on these conversations:

1. Innovation

Business Innovation is the process of envisioning and successfully implementing new ways of doing anything that creates value for an enterprise and its stakeholders.

There are several keys in this definition that I hope will be useful to you.  First of all, it involves strategy and creativity ("envisioning" requires both).  Second, it is not innovation until it is successfully implemented.  Until then, it's just creative thinking or a nice idea.  Third, it must create value for someone important to the enterprise (stakeholders can be the enterprise itself, its employees, shareholders, customers, consumers, etc.).  Finally, it is a process.  There are five phases or steps in business innovation (discussed in separate blogs -Our Process >).

The next three definitions are critical to resourcing, decision-making, and creating portfolios of innovation.  To be useful, they must be:

1. Simple and easy to understand
2. Clearly distinguish one level from another
3. Useful (test them out with your own people using some list of your own projects or examples from the marketplace.  Refine them until they actually help distinguish differences)
4. Shared broadly within your organization

2. Incremental Innovation

Not all innovation achieves the same goals for an enterprise.  And unless everyone understands that there are different levels and that different levels require different resources and approaches, the enterprise will find itself "innovating" but not growing at rates it desires.  Incremental, sometimes called "sustaining" or "core" is the base level.

My recent experience helped me clarify, and simplify my own definition:  

Innovations that keep your existing offering competitive.

• Sustains (or minimally enhances) market share
• Targets primarily existing customers of your business or the category
• Extends current platforms
• Usually addresses needs the market can currently articulate

3. Breakthrough Innovation

Innovations with new value propositions that expand your business into new markets with new advantages 

• Creates new market share
• Targets new customers or new usage occasions
• Leads the market with needs that are clearly emerging, but may not yet be articulated by the target
• Creates a new platform (this is less part of the definition than a key criteria for most business innovation.  Breakthrough is risky and resource intensive.  To be worthwhile, it should have fertility and long-term usefulness)

4. Transformational Innovation

The third level.  Some innovation is generally recognized as "paradigm shifting".  New products, services or ways of doing things, that once the market recognizes, they will never go back to the old way of doing things.  They transform the world, our behaviors and create new purchase habits.  Electric light bulbs, automobiles, etc.  Because transformational are easier to recognize after the fact, it is difficult to plan for or to pursue them.  However, it is useful to recognize them in the conversation.

Innovations that transform the world, changing markets and lives forever Transformational:

• Creates a new market
• Creates new spending
• Creates a new industry or category

Most strategies will lean toward a break between expectations for incremental and those of breakthrough or transformational.

5. Platform

At its basic level, platform thinking seeks to leverage some investment over time and multiple revenue streams.  That investment may be technological, channel, manufacturing process or equipment, markets or brand equity.  There are many examples.  The point is, to be attractive, higher risk, more expensive efforts require leverage -- in terms of longevity and/or revenue streams.  This will frequently help distinguish between incremental and breakthrough, because incremental generally leverage some existing investment (platform), whereas breakthrough generally require some new investment (platform).

A family of related offers that leverage an initial investment, technology or assets across an envisioned roadmap of revenue streams.

They must:

• Be BIG -- whatever is big for you in terms of revenue.
• Leverage a clear asset or investment
• Be Fertile -- you must be able to envision a developmental roadmap that unfolds over time, creating multiple families of incremental derivatives
• Have long-term viability
• Further the Vision and Strategy of enterprise

There are many more definitions that are useful, and many variations on these themes out in the world.  The key is to adopt or create those that best work for you, then align all your stakeholders around them and communicate them to everyone who participates in innovation.

Innovation clients frequently ask us how to make better decisions when pursuing breakthrough innovation.  Decision making in pursuit of breakthrough and transformational innovation is significantly different that which is for sustaining or incremental innovation (where frames of reference, past benchmarks, etc. exist).  There are five key decision points along the journey.  At each point, beliefs, assumptions, SWAGS, etc. will get tighter, and more useful.  

Today I'm going to address the second decision point.  Once you have had full range of beginning ideas, and selected a manageable number to fully describe and turn in concept outlines, how should you decide which ones to take into a more rigorous process of creating "Business Visions"?  The creation of Business Visions involves significantly more thought, time and effort.  It involves an escalation of resource commitment, and therefore is deserving of some thoughtful selections from within the existing range of possibilities.  And it is early in the game.  So what criteria to use?

The Creative Realities "SNIFF" Test©.

Five criteria should be considered at this stage.  All five require the use of judgment, rather than any real metrics.  Because for "breakthrough" innovation, there is no frame of reference, no empirical data, etc.  Here are the criteria to consider, we recommend using a 5 point scale to make judgmental evaluations of each:

Strategy:  How well does this fit with our strategy and further our Vision?

Need: How well does this address an important consumer/customer need?

Impact: Opportunity Size. Have we envisioned a sizable enough market with money to spend? 

Feasibility:  Can it be done technically within our timeframe?

Feel:  Most important -- What does your “Educated Gut” say?

As you consider these criteria, it is easy to simply select those few that have the highest average ratings on these criteria.  But before you do, look at what the ratings are telling you.  Used properly, they can identify the key areas of strength and weakness.  Before you make your decision, consider each criteria and ask yourself "How could I make this concept stronger in this criteria?  And how would that affect the other criteria?  Problem-solve your way to the strongest form of the idea before you make the decisions.  Then make them in an informed manner.

Take a "SNIFF".  What does it tell you?

SNIFF Test ©2010 Creative Realities, Inc.

Mark Gallagher of Blackcoffee suggested I take a look at this new book by Vijay Govindarajan and Chris Trimble, and I'm glad I did.  Vijay and Chris are associated with the Tuck School of Business at Dartmouth.  Vijay a professor and Chris an innovation speaker and consultant who is also on the faculty at Tuck.

This is a book written for leaders of innovation, primarily those who seek its pursuit from within existing business structures.  What I love about this book is that academia is finally waking up to some of the realities of the innovation challenge for management of existing businesses.  Vijay and Chris admit that it simply hasn't been studied well enough by the B-schools until strategy moved from teaching would-be managers how to manage the status quo to the fact change is inevitable (and on an incredible pace) and that therefore strategy must be about leading change - creating the future -- "Strategy as innovation."

While there are many excellent points made in this book and a bonanza of tips, myths, challenges, etc., there are three overriding premises that resounded with the nearly 20 year business innovationist/practitioner in me:

1. The major challenge in innovation is not in creating ideas.  Ideas are creativity.  Innovation is about successfully implementing ideas.  (I would point to the definition of innovation we have developed over time:  “Business innovation is the process of envisioning and successfully implementing new ways of doing anything that creates value for an enterprise and its customers.”  So total agreement here.

2. Succeeding at implementing innovation is especially challenging for existing organizations.  Vijay and Chris call the existing business the “Performance Engine.”  And they make a very good case for the major challenges for innovation efforts presented by Performance Engines.  Culture, competition for resources, lack of understanding the challenges, are but a few of them. 

As my partner Mark has consistently pointed out, we’ve all known this for a long, long time.  Machiavelli had it right back in 1514 when he said:

“It must be considered that there is nothing more difficult to carry out, nor more doubtful of success, nor dangerous to handle, than to initiate a new order of things. For the reformer has enemies in all those who would profit by the old order, and only lukewarm defenders in all those who would profit by the new order, this lukewarmness arising partly from fear of their adversaries, who have laws in their favour, and partly from the incredulity of mankind, who does not truly believe in anything new until they have had actual experience of it.”

~Niccolo Machiavelli

But for some reason, business leaders haven’t really understood this.  Too many have felt that if they and their organization’s were good at running existing business, they ought to be able to take ideas and implement them with the same excellence – wrong!

3. To succeed, the leaders of innovation have to develop new skills that allow the innovation effort to work synergistically with the Performance Engine. 

If you are an innovation leader, facing challenges in succeeding within your organization, this is a great, informative read.  I recommend it.