Sunday, March 17, 2013

Deconstructing Innovation: a complex concept made simple

One of the myths of business is that only new companies innovate.  Another myth is that only established companies do research and development. 

In reality, new firms need to invest in R&D to gain market share. And, established firms need to invest in innovation to lead the market or to protect their slice of the pie.

But what type of R&D? How do we classify what will work and what won’t? There is no straight answer to the innovation mystery.
Innovation is a complex process that has become a confused concept in recent times. The challenge with complex concepts is converting them into the simple.

In a recent issue of Research.Technology.Management, Jim Euchner, the vice president of global innovation at Goodyear, proposes a set of innovation types:
  • Innovation that feeds the existing profit engine
    • Process innovation
    • Faster, better, cheaper product innovation
    • New feature (incremental) innovation
  • Innovation that creates a
    • New profit engine
    • New product innovation
    • New business innovation
    • Disruptive innovation
Experience shows that organisations seem to find it harder to become successful as they move down the list. Success in the latter categories, although harder to achieve, leads to greater profits.

Euchner also suggests that we pay more attention to the context or the circumstances – generally business circumstances – in which the innovation is situated, effectively matching the type of innovation needed to best suit the situation.

The key is to recognise that innovation is not a standard process. As the context changes, so does the approach to innovation. And as approaches change, so does the need for different types of innovations.

A couple of examples from NZ  highlight how different companies achieve success through quite different innovation strategies.

Glidepath is an excellent example of innovation that changed according to the situation. When Glidepath started out as a ’new kid on the block’, its product offering could be classified as a ‘process innovation’. The business has since matured and the ongoing innovation now falls into the ‘faster, better, cheaper’ category.

AQUI-S New Zealand showcases how a new firm is breaking into the market with a unique product innovation – humane fish tranquilisers. They are exporting to South America, Asia and may soon add the European market to their list. They had a simple, good idea that needed a lot of R&D to commercialise, and of course, gain regulatory approval.

So it is important to understand that there is no one-size-fits-all philosophy in terms of successful innovation. The one constant is that you have to be open to change and new points of view. Innovation is continuous.

Successful innovators and entrepreneurs all embrace change and the risks that they pose. In fact, innovation is the poster child of the mantra that there are no rules. Only by trying out new things, by failing, by discovering what works and what doesn’t, do you gain answers to the innovation question.


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