I read Jatin Desai’s book Innovation Engine – Driving Execution for Breakthrough Results and loved it. You can read my review of the book here. I wanted to learn more. Therefore, I interviewed Jatin about different aspects of Innovation. Jatin shared a plethora of great information so I am spreading the interview across two posts. Stay tuned for part two next week.
1. What is innovation?
Innovation is the conversion of knowledge and ideas into a benefit for some or all stakeholders, which may be for commercial use or for the public good. Incremental innovation is when there is an incremental benefit and incremental behavior change for the consumer of your products and services.
Innovation is considered a breakthrough when your product/service significantly benefits the consumer and there is a significant positive change in the behavior of the customer/consumer you serve (saving of time, ease of use, cost, productivity, etc.)
2. Can innovation be measured? If so, how?
Yes, absolutely. Some of the DeSai Group’s best customers have implemented an innovation scorecard and innovation index. These are tools that can measure innovativeness at a project level, at a customer level, at a departmental level, at a business unit level and at the corporate level.
In order to measure innovation, you have to measure the input, process, and output parameters of your innovation activities.
- Input parameters are all investments you are making for the innovation program. Examples include training, dedicated resources, number of people certified, technology and other resources required to build your internal capability for innovation.
- Process parameters are the activities dedicated to bringing ideas to implementation. Examples include 1) investment for prototyping and testing ideas and 2) research costs for ideas, equipment and various technologies.
- Output parameters are activities that show implementation and success. Examples are revenue growth, profit growth, customer acquisition rate, customer satisfaction levels, and reduction in cost, etc.
3. Besides product innovation, where else can a company innovate?
Most companies focus all of their innovation efforts on product or service innovations. Unfortunately, these are the easiest type of innovation that can be duplicated in the market. Therefore, ROI for such innovations tends to be the smallest compared to other types of innovations The surest way to outcompete is by innovating in other areas.
There are 10 types of innovation areas that company can innovate in (based on research from The Doblin Group).
- Business Model – how the company makes money
- Networks and alliances – strategic partnerships
- Core processes- processes that touch the customers
- Enabling processes – processes that enable core processes
- Product – performance, features, and value of your offerings
- Product Systems – how you package some or all of your products to create new offerings
- Channel – how you deliver your products and service to end customers
- Service – quality and process of service to your customers
- Branding – emotional feelings about your offerings by customers
- Customer experience – how customers interacts with your offerings
4. How does a company link innovation to their current business strategy?
Each company must have a business strategy. Often, they are declared, but in smaller firms, it may not be well articulated. Every business, independent of their size, uses one of handful business strategies:
- Pioneering – first to market with new product or service
- Fast follower – Wait for the offensive leader to introduce a product first, monitor the elements of the business model, identify shortcomings, and then introduce a better product that corrects errors made by the pioneer.
- Imitative – firms of this type prefer to produce a clone of the pioneers’ products. They have no intention being the first or to leapfrog the pioneer. These players have unique execution capabilities, such as low‐cost labor, inexpensive raw materials, or low‐cost manufacturing.
Next, the company must evaluate the current business cycle and design the innovation strategy match to it. A company will be in one of these phases ‘start-up’, or growth, or mature, or decline.
- In a start-up phase, you need innovation strategy that allows lot so experimentation and risk taking. You cannot afford to invest in permanent resources (large building, big IT infrastructure, etc.) until your business model is stable. In this phase, focus should be on finding the first few customers, defining a new business model and implementing new product or service innovations. Focus is ‘experimentation’.
- In a growth phase, the focus is on execution. Business needs to be scaled. Therefore, innovation strategy should be to invest in process innovations, or delivery innovations, or customer experience innovations, and less on developing new radical product/services. Investments should be to create proper infrastructure to scale and execute fast before the market window closes up. Focus is ‘execution’.
- In the mature phase, there is tremendous competitive pressure, customers are not happy, margins are declining, customers are leaving, and vendors are screaming. The best innovation strategy here should be to protect the business and not overspend. Manage competition closely. Assure your best customers are extremely happy. The focus should be on ‘protection’.
- When an organization reaches the decline phase, it is very difficult to turn the business around organically, but it can be done. Typically, the valuation of the business is negative, and much harder to find investment funds. It is not recommended to invest in new innovation unless there is a significant untapped internal intellectual property available within the company. Best options are changing the leadership at the top, drastically restructuring business, merging or selling the business, or planning for divestiture.
In summary, depending on the business strategy, and the business cycle, an appropriate innovation strategy must be developed and implemented.
5. How can a company innovate together with their customers?
In today’s dynamic world, market shifts occur at breakthrough speed. Knowing even the slightest movement of customer preferences is becoming increasingly important as more competition enters your market segment, especially from India and China.
Therefore, engaging your best or all customers all the time has become a critical strategy. Organizations like Xerox and GE have set up ‘Customer Interaction Centers’ and ‘Garages’ to allow customers to directly interact with products, services, and the know-how of these firms. Customers are allowed to bring their problems, in hope, they can find solution. During the engagement process, these companies are helping to solve real customer needs, as well as, learning deep customer preferences about how their products work in the hands of their customers.
Cognizant, India’s second largest IT company, has created a ‘Customer Innovation Index’ that promotes discovery of new innovations for their customers by their on-site and off-shore teams. These innovations can be small or radical. Each idea is cataloged immediately, monitored, developed, implemented and shared in real-time.
Procter and Gamble spends millions of dollars on ‘ethnographic research’. The special market insight process is utilized to learn how customers interact with P&G’s products. By observing customers in their own environment instead of a shopping mall, P&G is able to find a plethora of new insights for current product enhancements or develop completely new products.
Company mindsets about “Product Development” need to evolve into an Innovation Engine to keep up with the competition.
Over to you. Share your innovation insights below. Please comment.
- Is your Innovation Engine driven solely by products and services?
- How do you innovate with your customers?
- How does your organization define Innovation?