Begin a Systematic Innovation Practice - Step Four
By Praveen Gupta
Developing a systematic innovation strategy from scratch is a challenge many companies are facing in today’s fast-paced world. This series of articles will focus on the steps a company should take in creating its own innovation practice, one that is developed specifically for its product, process or service. Step one is identifying the company’s type of innovation. Step two is scouting and strategizing for innovation. Step three is committing to, and cultivating, an innovation environment. This article looks at step four – innovate disruptively. The fifth, and final, step is to sustain innovation.
In the first three steps for developing a systematic innovation strategy, a company prepares to innovate disruptively by creating the environment in which to institutionalize innovation, having its leaders instill a culture that believes in the significance of innovation. Leadership is accountable for the organization’s profitable growth. Successful businesses grow through in-house innovations; the challenge is deciding what to innovate. Companies must learn to identify opportunities for dramatic growth through disruptive innovations.
Identify Disruptive Innovation Opportunities
According to Clayton Christensen, in his book Innovator’s Solution, the disruptive innovation must have predictably higher chance of success. An organization cannot afford to invest resources in a project for disruptive innovation that has a high probability of not being successful. An organization cannot wait for business downturns to trigger an innovation as successful organizations continuously innovate products or solutions. Investing in innovative new products while the organization is doing well is necessary to perpetuate profitable growth.
Identifying opportunities for innovation or new products is hard thing to do. There are businesses in which faster, better and bigger products were designed but never sold. One of the critical acts of leadership is to appoint an innovation leader responsible to lead a team of innovative new products, such as the role Steve Jobs unofficially holds at Apple. A planned approach is to appoint a leader who is interested in innovation, promotes employee creativity, understands new product processes, knows the significance of profitable growth, challenges employees to do their best, enjoys competition and takes pride in success.
An innovation leader provides the necessary resources and aligns the organization for growth through innovation. The innovation leader treats the task of developing new innovative products as projects and institutionalizes innovation through actions promoting employees’ intellectual engagement.
Identifying Opportunities for Innovation
The innovation team works on identifying new opportunities through learning customer behaviors and circumstances, extensions of the current behaviors and expansions of their needs. Studying customer behaviors in a multi-dimensional perspective helps better identify customer pain points, complaints, chronic problems, indecisions, insecurities, stagnations, inconveniences or discomforts. Additionally, competitive benchmarking, SWOT (strengths, weaknesses, opportunities, threats) analyses, and trends in marketplaces, industry performances and adjacent markets or industries can also generate ideas for innovative products. Generating lots of ideas sounds easy; however, generating innovative ideas require thinking without constraints. Many times good ideas are shot down by pre-imposed constraints. It is necessary to separate the definition of requirements from developing solutions, and not allowing the solution to dictate requirements. Once the ideas are generated they can be filtered, analyzed and prioritized for salability of the product to meet the revenue growth requirement.
Hypothetical Path of the iPod’s Development
Consider a hypothetical path leading to the development of the personal music device, the iPod. Personal computers were developed in the early eighties, new peripheral or derivative technologies were developed and new capabilities were added to the computer, including audio. Concurrently, in the music industry the Walkman was the latest and greatest discovery of its era, but stagnation had crept into personal music devices. MP3 technology was developed, devices representing the trends in the personal music devices developed and conflicts arose. Some opportunists were observing the market, thought about their products, the computer and saw the potential for disruption – the computers, strip them of everything to do with the computer while keeping the music and significantly reduce its size. Next, commercialization issues were evaluated, new distribution methods developed and finally the solution was refined before the iPod took over the marketplace. To develop iPod-like devices, corporate leadership must relentlessly pursue innovation in their companies to continually look for new opportunities. There will be one “big” opportunity that can only be realized while working on many smaller opportunities. The incrementally innovative new products will help revenue grow incrementally before a major breakthrough occurs and a new revenue plateau is established.
Avoiding Innovation Failures
Studies have shown that ideas are dime a dozen – there is no shortage of ideas. Breakthrough products come from the distribution of the quality of ideas. The likelihood of identifying that product in advance is small. A culture of continual innovation, therefore, must be created in which a classification of ideas is based on many industry specific factors.
The most important aspect of making innovative products is to avoid failures caused by three factors:
- An inability to introduce the innovation to potential users (i.e., the marketing plan),
- Poor optimization of design for reproducibility and
- An insufficient value proposition to change behaviors due to lack of sufficient innovation.
These failure modes can be avoided by:
- Developing a commercialization plan (developed plan with the support of required resources),
- Planning operations for reproducibility (designed to virtually perfect the solution) and
- Demonstrating the extent of the innovation (researched and purposefully imagined).
Establishing Innovation Projects
Once the opportunities have been identified, analyzed, enhanced and sifted through success filters, potential projects must be defined for new innovative product development. To prevent project delays, a company must deploy a process for innovation that in some way includes the following five steps: target, exploration, development, optimization, commercialization (TEDOC). The commercialization must be a distinct and required step as it is the divider between success and failure, an innovation or simply creativity.
To some extent everyone is creative and innovative. But when asked to be “innovative,” it is not easy to produce results. TEDOC represents all key aspects of the successful innovations that one must be aware of – helping develop skills and competency in innovating on demand for breakthrough solutions.
Defining an opportunity for innovation is critical. In order to develop breakthrough innovations, a business needs to know what to innovate. Determining what to innovate depends upon the need for innovation. This need can be found in complaints, nagging or chronic problems, indecisions, frustrations, technical limitations, circumstances and competitors’ organizational limitations. A business should also look at the maturity of its industry, trends in supplier performance, SWOT analyses, industry performance and the available market.
Once potential innovation opportunities have been identified, the innovation team must document key benefits of the solution to be innovated and determine the key measures of its success.
A company needs to fully, and quickly, research its opportunities to beef up its necessary competencies. The innovation team should identify and research keywords associated with the opportunity for innovation, generate new ideas, answer questions, generate new questions and generate more new ideas. These ideas then need to be combined, filtered, analyzed and prioritized. These selected ideas are analyzed as inputs to the solution to be developed and experimented with for developing solutions. Tools in this phase may include brainstorming, affinity diagrams, failure mode and effects analysis (FMEA), process thinking, etc.
Innovators need to develop alternate solutions that are significantly innovative. Experience shows that following the “rule of 2” helps stretch imaginations while people experiment. According to the rule of 2, in order for a solution to be a breakthrough innovation, it must affect the performance of the desired features by dividing or multiplying by 2. In other words, if less is better halve (divide by 2) it, if more is better then double (multiply by 2) it. The expected change is expected to force a different approach to the current position.
The extent of innovation depends upon the innovation team’s efforts (the amount of available time committed to the desired innovation), knowledge (domain expertise), ability to play (experimentation) and overall imagination (extrapolation to achieve breakthrough innovation). In order to create a unique selling proposition and barriers or competition, a company must try to maximize innovation rather than just create a minimal innovation. Tools used in this phase include the competency necessary to create new knowledge, creativity for proposing alternative solutions, evaluation and analytical methods, and the facility to conduct experiments.
Many great innovations remain marginally successful and have limited shelf life due to an inability to reproduce it effectively and economically. A great design alone does not provide a good return on innovation. The optimize phase focuses on maximizing the economic benefit of the innovation. In the current R&D-driven product development environment this is the most significant step missing for ensuring a product’s success. Due to a lack of optimization in the design or pre-production stage(s), manufacturing operations suffer from design constraints. Today, most designs are quickly verified for their functionality and performance, but only on a limited sample size of potential process conditions during a product’s life cycle. The prototype or pilot run that looks acceptable may result in continual rework and field failures leading to a significant adverse impact on profit margins. The typical used tools in this stage are process management, optimization software programs and the facility to conduct the necessary experiments.
Many entrepreneurs and innovators fail in this phase – an innovative solution exists but not enough people who would value it know about it. Without development there is no creativity, without optimization there is no profit and without commercialization there is no innovation. It is the commercialization of a creative solution that coverts creativity into innovation. Every innovator, therefore, must learn the process of commercialization and develop the knowledge necessary to create value. In the commercialization phase, an innovation team must practice strategic thinking, methods of pricing a solution, messages of value proposition, viral marketing, business planning, and making deals for licensing or selling the breakthrough solutions.
Leadership expert Steven Covey says to begin a task with the end in mind. In the case of innovation, begin innovating with commercialization in mind. Often, commercializing is tougher than discovering the innovative product. The full cycle of innovation, thus, starts from the identification of the need for an innovative solution and ends with the commercialization of the innovative solution.
Developing innovation on demand makes the task of commercialization easier as the innovative solution is already sold. However, improvement in the success rate of demand-driven innovation depends on the speed of the innovation. Once a company masters the process of innovation through practice and commitment, a company can innovate quickly.
Innovating disruptively requires identifying the need, expanding the horizon of thoughts, developing breakthrough solutions by applying the rule of 2, and optimizing and commercializing the solutions to ensure the innovation’s profitable growth. A good understanding of this process improves the speed resulting in making innovation a success with exciting rewards.
About the Author:
Praveen Gupta is the lead author of Business Innovation in the 21st Century that organizes various aspects of innovation from concept to commercialization. He is the president of Accelper Consulting, which provides training and consulting services in innovation and teaches business innovation at Illinois Institute of Technology, Chicago. Contact Praveen Gupta at praveen (at) accelper.com or visit http://www.accelper.com.