Someone once told me this: “Innovation is like an apparition of the Virgin Mary: one person saw her, but everyone talks about it.” Although funny, the quote aptly captures an attitude towards innovation that exists in many companies today. Innovation – and the skills that enable it – are sometimes considered as mystical gifts, preserved for the chosen few. In other cases, innovation is feared, because it involves unregulated processes, risk taking and investments with unpredictable outcomes. In this blog post, I’d like to make a case against this kind of innovation paralysis. Every company must innovate, and with the right understanding of the word ‘innovation’, every company can.
Innovation. The word is tossed around carelessly, and is repeatedly illustrated with the same few business cases. Some of the usual suspects include autonomous transport (Google, Tesla), wearable tech (Apple) and of course … the sharing economy (Uber, Airbnb).
While these success stories have value, they can also confuse or even dishearten business leaders. Too often, innovation is presented as a largely random process, fueled by sudden mind shifts and unexpected strokes of genius. For most companies though, this picture is dead wrong. Overnight miracles are possible, but they are an exception to the rule.
Innovation is a business discipline
A lot of business leaders know they want innovation, yet they struggle to define what it actually means to them. Simply put, innovation is about making changes that add business value, in terms of either revenue growth or increased operational efficiency. This value can be created in four ways:
- introducing new products;
- optimizing operational processes;
- launching new business models;
- entering new markets.
The goal is never innovation itself, but the competitiveness and long-term survival of the organization.
Considering the key elements of this definition (‘creating value’ and ‘safeguarding competitiveness’), it quickly becomes clear that innovation and entrepreneurship are two sides of the same coin. And just like entrepreneurship, innovation is never a one-time deal. To the contrary: it is an indispensable and ongoing business discipline. By default, innovation takes time – and usually quite a lot of it. Ignoring or avoiding the innovation imperative – driven by either confusion or fear – is a surefire way to destroy your business.
Thinking in terms of functions instead of solutions
A question that naturally follows from the above is this: how can we maintain a clear focus on innovation, by treating it as a discipline? While a solid innovation strategy isn’t designed overnight, a lot can be gained from thinking in terms of functions instead of solutions. An example:
- Communication is a function that can be summarized as the exchange of information through speaking, writing or any other medium.
- This function manifests itself through multiple solutions. From cave paintings and smoke signals to fixed phone lines and the internet, they are always evolving.
Companies that solely focus on the solutions they offer, risk losing sight of the bigger picture. That’s what innovation is all about: developing, new and better solutions for the function that you fulfill.
Consider the bankruptcy of a major entertainment store selling CDs, DVDs and video games. Its function was to ‘deliver entertainment’, but the solution (selling classic storage formats through bricks-and-mortar retailing) was surpassed by solutions that were simply better. On-demand streaming services such as Spotify and Netflix have turned CDs and DVDs into a thing of the past. And why would you purchase video games in a store if digital distribution platforms like Steam offer everything online? The entertainment store we’re talking about could have seen this coming, if only they hadn’t lost sight of their function.
For companies wondering how to innovate, these questions are a great start:
- Which function are you offering?
- How is your function fulfilled in the best possible way? Can you make changes that create value?
- Which other solutions exist in your own playing field and beyond it? Are some of these threatening for the survival of your business?
Towards an innovation strategy
Understanding your company’s function and staying ahead of the curve by knowing your playing field are two important first steps to ignite innovative thinking within your organization. It will also help you in determining a clear direction for future innovation efforts. Yet, as stated earlier, this is never a one-time exercise: innovation is a discipline that requires constant attention.
For a lot of companies, this is the second hurdle. After all, answering daily client demands and keeping day-to-day operations up and running usually requires most – if not all – of the company’s resources. Allocating people and budgets to dedicated innovation efforts requires a willingness to embrace uncertainty, for the sake of long-term goals. This is what it means to create and sustain a culture of innovation: giving teams the autonomy to focus on uncertain, non-routine business opportunities, without using classic financial benchmarks to assess the returns.
Get your innovation efforts structured
Despite fast-changing environments and the chaos that characterizes the first stages of innovation, at CREAX, we firmly believe that innovation can be structured. Curious about our innovation approach? Subscribe to the CREAX blog to stay updated.