A couple of months ago I was discussing models that help to think about focusing innovation efforts with Hutch Carpenter. I said I would post one that I use, and Ooops! I forgot to do that. So here’s a model that I often use when discussing the type of innovation capability a client wants to build. My working definition of innovation is “doing something new that adds value to the business.” It’s not just about making new products or technology. For that reason, the people, processes and skills necessary to innovate can vary greatly, and we need to be very clear about what is necessary for each specific situation.
This model is based on two points that drive the approach to the innovation effort. First, the degree to which the lines in each box are orderly or chaotic represents how well the end solution can be defined before the project starts. Second, success criteria is determined differently at each innovation dimension. Let’s look at how they differ.
Dimension 1 – I call this Innovation for Optimization. The product or service that the company develops will stay the same, and innovation will focus on new ways to manufacture and deliver the offering to the market. New technologies, processes, and organizational structures may be introduced. Clear benchmarks for success exist, and the results can be tangibly measured with existing metrics. The consumer will not notice a difference in the product or service, but may share in the benefits of the innovation through cost savings and ease of access to the product or service. An example would be a new manufacturing technology that reduces production costs by 50%.
Dimension 2 – I call this Innovation for Improvement. The goal is to improve the existing offerings themselves. It may be that the product becomes easier to use, or new technologies will enable enhanced functionality. In this dimension, success criteria may not exist already, and can be derived by learning directly from the market. It may involve learning what pain points the consumer has with existing products, or uncovering new uses that an upgrade can deliver. An example would be the addition of calcium to an orange juice product.
Dimension 3 – I call this Innovation for Invention. The goal is to develop new products and services that will provide the same benefits as existing options, but in new and better ways. In this dimension, success criteria for the specific product attributes does not exist, and consumers may not be able to articulate the potential solutions. However, the benefits are well recognized. An example would be new products that increase the ease of eating yogurt on the go. A yogurt company may develop new technologies or formulations to enable drinkable yogurt or yogurt in a tube. New internal benchmarks for manufacturing and cost structures may need to be created, as the company is making different products.
Dimension 4 – I call this Innovation for Disruption. The result of this type of innovation is that it fundamentally changes the competitive landscape. Very often – but not always, this type of innovation focuses more on changing existing business models than on changing the products themselves. We can see this type of innovation playing out in the publishing and other media industries, as existing business models are becoming irrelevant. New products and technologies play a part, but they are enablers that allow consumers to access media more easily and inexpensively than ever before. The sources of power are shifting in the market, and existing benchmarks become irrelevant. Consumer research is very important here, but as a source of information about what is valued, not as a source of solutions as in dimension 2.
Since my work involves ensuring that new offerings are relevant to the market, the focus is from the perspective of how the consumer (or other end-user) will perceive the differences. It also sets the stage for how directly the consumer can give input to what the end result will be, and guides the type of work we need to do. From my experience, most companies are very good at Optimization, and they can often stretch to create innovative improvements. This work can be handled in existing development processes. In future posts, I will describe the fundamental difference in the work necessary to innovate in the 3rd and 4th dimensions, as this is where the existing development processes typically break down.