Innovation is a hot topic right now. Before reading this post, you probably had to scroll past a dozen others in your feed on LinkedIn or Twitter—motivational quotes from entrepreneurs like Gary Vaynerchuk, revolutionary digital experiences created by Apple, or disruption to traditional markets by the likes of Tesla. Inspirational, yes; but unless you're a working in product and spending millions on R&D along with the likes of Uber or Rocket Lab, how do you know if you're innovating? How do you know that you won't end up like Blockbuster or Kodak? And how do you stay relevant to today's—and tomorrow's—buyers?
Let's consider some popular takes on innovation, what they mean, and how you can apply their principles to your business—no matter what you do.
A lean approach
It's true, innovation is hard to measure and its difficult to predict success. To be truely innovative you need to be solving a deep pain point. Most books on innovation that have become popular in the last decade are in some way linked to lean theory (The Four Steps to the Epiphany / The Lean Startup / Running Lean) and are centred around the lean canvas and "building things". This is heavily focused around identifying a problem, developing a solution and finding product market fit in a rapid manner.
This approach has been shown to be a highly effective way to build, measure and learn in a startup environment where you can't rely on existing channels to market and a high level of risk is expected. It also sometimes works in larger corporations that understand that innovation requires an acceptance of failure to find a new way forward. However, it's primarily tailored to the startups, product, and higher level workshop environments.
The Value Proposition Design canvas is another useful tool to start digging into how you are creating value, and whether it is sufficient to take an idea forward. Its a great first step into design thinking. By understanding how your customers behave and how to empathise with them, you can make sure your solutions are tied to things that matter, not just an internal opinion that something is a good idea. In the famous words of Steve Blank, "get out of the building" and talk to buyers, don't make assumptions about what they might want or how they might behave.
Think about how you bring the right skillsets and mindsets into your organisation to solve the big problems, but also be conscious that innovation is about more than product.
Leading by design
For organisations that use a traditional management structure, change is difficult, and no one team alone can reinvent the status quo by introducing frameworks like lean theory. A top-down belief in the value of design thinking and building a customer-centric business model is essential, along with the openness to experiment.
A great example of this is the way in which David Gram, former Innovation Director at LEGO, helped turn the company's fortunes around by putting himself back in the shoes of LEGO's buyers and working out how best to innovate within a conservative corporate structure that was resistant to change. He is a proponent of becoming a diplomatic rebel, a mix between being “one that challenges the status quo with one that does it with care, love and empathy”.
Cultivate an environment of experimentation where failure is simply a stepping stone to learning and success.
After listening to his presentation at Accelerate last year and learning how his team experimented in different markets under a completely different brand name, there were some useful insights:
- Build a team to experiment. It needs to be cross functional, have representatives from different parts of the company, and avoid the siloing of information.
- Have the right processes and tools. Ensure design thinking is causing you to question assumptions, learn and iterate, and also consider how innovation might impact your business/operating model.
- Properly measure the value of innovation. Financial metrics alone aren't sufficient, and factors such as learning and capability building are essential to determining long term success.
In fact, LEGO has now a created a corporate innovation tool. LEGO Serious Play can be used to enhance innovation and business performance to help explain answers to complex problems in a creative manner that might otherwise be difficult to extract from people.
When Aamplify runs workshops using LEGO, it's quite amazing how overcoming the initial apprehension by some participants can result in tangible insights into their thinking and their business as soon as they start using their hands to think rather than their minds.
Start thinking about how you are bringing design thinking into your day-to-day work.
An economic point of view
Peter Thiel, one of the "PayPal Mafia", has now become a household name after he controversially expressed his support of the Trump Campaign and made the news with recent visits down under. His book, Zero to One, he raises a number of questions, including consideration of innovation from an economic standpoint and how this compares with our learnings of economics, which tend to be driven by the Chicago school of economics - perfect competition results in efficient markets that should require minimal intervention.
But is a monopoly a failure of capitalism? Thiel suggests that monopolies can be good for innovation (and society), and that "competition is for losers"—his argument is that by having a monopoly you increase your ability to innovate through a dominant market position and strong profitability; and with rapid innovation there are very few true monopolies. Since barriers to entry are constantly decreasing, a monopoly won't actually protect you in the current market as it might have last century.
While there are a range of counter arguments to this, his position is thought provoking: find a place in the market where you can make abnormal profits, rather than just focusing on the product itself. The challenge is often how to bring this sort of thinking into an organisation where people are often task based, or focused on what is immediately in front of them. You might need to invest in up skilling teams internally, or look at bringing in outside experts with fresh perspectives.
Look for where you can create unique value and generate sufficient profit to buy market share and fund ongoing innovation in ways that others can't.
Ten types of innovation
As we have seen, innovation is about more than your product or service; it's something that needs to be woven into the fabric of the business. But, how do we objectively analyse innovation in a corporate context? How do we decide what ideas are good and should be pursued, and which are disasters waiting to happen? How can we objectively filter out bad ideas without a subjective battle of opinions? How do we innovate across an entire business unit, not just a product?
This is where The Ten Types of Innovation by Larry Keeley his team at Doblin, the innovation practice of Monitor Deloitte in the US, is particularly interesting. They looked at over 2000 companies that have innovated (or failed to innovate)—including Amazon, IBM, and Ford—and came to the conclusion that all great innovations thoughout history can be reduced to ten basic types, organised within three categories:
This is a great tool for helping to assess how you're approaching innovation in a structured manner that "requires identifying problems that matter and moving through them systematically to deliver elegant solutions". Analyse your competitive environment, discover gaps and potential opportunities for doing something different that disrupts the market. They also highlight once again that innovation is a team sport and drives home the importance of weaving innovation right into the culture of the organisation.
The key is to make sure you're innovating on multiple fronts. Look across the spectrum—configuration, offering, and experience all need attention when innovating to create a viable new offering.
Think beyond product— there may be greater opportunities to innovate in other parts of the business such as your brand and customer experience.
What happens next?
Framing innovation as a disciplined science rather than an art can make it more measurable and less subjective. And if you want to innovate, it's essential to start taking steps towards transitioning your business culture to be user-centric rather than being driven by top-down decisions and assumptions.
In particular, as your business expands and you can fund meaningful investment in further growth, it's essential to ensure that you have the right mix of capabilities across the ten types of innovation. While these might be built internally, consider that they may also require bringing external advisors on board to help you in the areas where it doesn't make sense to invest in building in-house capabilities.
So we'll end with this question: what is the one step you can take today that will set your team or business up for a more innovative tomorrow?
Aamplify works with clients who are looking to reinvent the way they do business by helping them understand their buyers, build their brand, and create digital experiences that delight. Get in touch with us to find out how we can help set you apart from the crowd.