Tuesday, January 9, 2018

INNOVATION SPECIAL ....The 12 Different Ways for Companies to Innovate PART I

The 12 Different Ways for Companies to Innovate PART I
Companies with a restricted view of innovation can miss opportunities. A new framework called the “innovation radar” helps avoid that.
Faced with slow growth, commoditization and global competition, many CEOs view innovation as critical to corporate success. William Ford Jr., chairman and CEO of Ford Motor Co., recently announced that, “[f]rom this point onward, innovation will be the compass by which the company sets its direction” and that Ford “will adopt innovation as its core business strategy going forward.” Echoing those comments, Jeffrey Immelt, chairman and CEO of General Electric Co., has talked about the “Innovation Imperative,” a belief that innovation is central to the success of a company and the only reason to invest in its future. Thus GE is pursuing around 100 “imagination breakthrough” projects to drive growth though innovation. And Steve Ballmer, Microsoft Corp.’s CEO, stated recently that “innovation is the only way that Microsoft can keep customers happy and competitors at bay.”
But what exactly is innovation? Although the subject has risen to the top of the CEO agenda, many companies have a mistakenly narrow view of it. They might see innovation only as synonymous with new product development or traditional research and development. But such myopia can lead to the systematic erosion of competitive advantage, resulting in firms within an industry looking more similar to each other over time. Best practices get copied, encouraged by benchmarking. Consequently, companies within an industry tend to pursue the same customers with similar offerings, using undifferentiated capabilities and processes. And they tend to innovate along the same dimensions. In technology-based industries, for example, most firms focus on product R&D. In the chemical or oil and gas industries, the emphasis is on process innovations. And consumer packaged-goods manufacturers tend to concentrate on branding and distribution. But if all firms in an industry are seeking opportunities in the same places, they tend to come up with the same innovations. Thus, viewing innovation too narrowly blinds companies to opportunities and leaves them vulnerable to competitors with broader perspectives.
In actuality, “business innovation’’ is far broader in scope than product or technological innovation, as evidenced by some of the most successful companies in a wide range of industries. Starbucks Corp., for example, got consumers to pay $4 for a cup of latte, not because of better-tasting coffee but because the company was able to create a customer experience referred to as “the third place” — a communal meeting space between home and work where people can unwind, chat and connect with each other. Dell Inc. has become the world’s most successful personal computer manufacturer, not through R&D investments but by making PCs easier to use, bringing products to market more quickly and innovating on processes like supply-chain management, manufacturing and direct selling. And Google has become a multibillion-dollar goliath not because it has the best search engine, but because it pioneered “paid search” — the powerful concept that vendors would be willing to pay Google to match consumers with relevant offerings as a by-product of free searches the consumers conduct.
Conversely, technological innovation in the laboratory does not necessarily translate into customer value. For instance, high-definition television is a radically new innovation from a technological perspective, requiring new recording, transmission and receiving equipment, communication frequencies and programming. But the result — an incremental improvement in picture sharpness — is of limited value to the general consumer. One of the most technologically advanced computers ever created was the NeXT Cube, developed by Steve Jobs’ company NeXT Computer, Inc. The product featured a host of technological advances, including clickable embedded graphics and audio within e-mail, object-oriented programming, magneto-optical storage and an innovative operating system. But the NeXT Cube was a commercial flop. Few compatible software applications were available, and consumers balked at the prospect of switching to a radically new system.
About the Research
We developed the innovation radar based on interviews from managers responsible for innovation-related activities at several large companies across a range of industries. Participants included Boeing, Chamberlain Group, ConocoPhillips, DuPont, eBay, FedEx, Microsoft, Motorola and Sony. We also reviewed the academic literature on innovation to help identify and define the radar’s 12 dimensions. To measure those dimensions, a comprehensive set of questions was compiled, following well-accepted best practices in metrics and questionnaire design.i 
Two distinct sets of measures were created for each dimension: (1) reflective measures to obtain an overall metric for the actual level of innovativeness at each dimension and (2) formative measures to gain insight into activities or factors that contribute to the observed level of innovativeness.
Defining Business Innovation
To avoid innovation myopia, we propose anchoring the discussion on the customer outcomes that result from innovation, and we suggest that managers think holistically in terms of all possible dimensions through which their organizations can innovate. Accordingly, we define business innovation as the creation of substantial new value for customers and the firm by creatively changing one or more dimensions of the business system. This definition leads to the following three important characterizations.
Business Innovation is About New Value, Not New Things. Innovation is relevant only if it creates value for customers — and therefore for the firm. Thus creating “new things” is neither necessary nor sufficient for business innovation. Customers are the ones who decide the worth of an innovation by voting with their wallets. It makes no difference how innovative a company thinks it is. What matters is whether customers will pay.
Business Innovation Comes in Many Flavors. Innovation can take place on any dimension of a business system. The Home Depot Inc., for example, innovated by targeting “do it yourselfers,” an underserved customer segment. JetBlue Airways Corp. has succeeded in the U.S. domestic airline market by offering a better customer experience that includes live satellite television, leather seats and fashionably clad flight attendants. And Cisco Systems Inc. has improved its margins through process innovations, such as the company’s ability to close its quarterly financial accounts on the same day that its quarter ends.
Business Innovation is Systemic. Successful business innovation requires the careful consideration of all aspects of a business. A great product with a lousy distribution channel will fail just as spectacularly as a terrific new technology that lacks a valuable end-user application. Thus, when innovating, a company must consider all dimensions of its business system.
The Innovation Radar
The innovation radar displays the 12 dimensions of business innovation, anchored by the offerings a company creates, the customers it serves, the processes it employs and the points of presence it uses to take its offerings to market.

A 360-Degree View
The question then immediately arises: How many possible dimensions of business innovation are there, and how do they relate to each other? For three years, we have examined that issue in depth with a group of leading companies, including Motorola, Chamberlain Group ADT, Sony, MicroSoft and ConocoPhillips. (See “About the Research.”) Based on discussions with managers leading innovation efforts at these companies and a comprehensive survey of the academic literature on the topic, we have developed, validated and applied a new framework called the “innovation radar.” This tool presents and relates all of the dimensions through which a firm can look for opportunities to innovate. Much like a map, the innovation radar consists of four key dimensions that serve as business anchors: (1) the offerings a company creates, (2) the customers it serves, (3) the processes it employs and (4) the points of presence it uses to take its offerings to market. Between these four anchors, we embed eight other dimensions of the business system that can serve as avenues of pursuit. Thus, the innovation radar contains a total of 12 key dimensions.
The 12 Dimensions of Business Innovation
DIMENSION
DEFINITION
EXAMPLES
Offerings
Develop innovative new products or services.
• Gillette Mach3Turbo razor
• Apple iPod music player and iTunes music service
Platform
Use common components or building blocks to create derivative offerings.
• General Motors OnStar telematics platform
• Disney animated movies
Solutions
Create integrated and customized offerings that solve end-to-end customer problems.
• UPS logistics services Supply Chain Solutions
• DuPont Building Innovations for construction
Customers
Discover unmet customer needs or identify underserved customer segments.
• Enterprise Rent-A-Car focus on replacement car renters
• Green Mountain Energy focus on “green power”
Customer Experience
Redesign customer interactions across all touch points and all moments of contact.
• Washington Mutual Occasio retail banking concept
• Cabela’s “store as entertainment experience” concept
Value Capture
Redefine how company gets paid or create innovative new revenue streams.
• Google paid search
• Blockbuster revenue-sharing with movie distributors
Processes
Redesign core operating processes to improve efficiency and effectiveness.
• Toyota Production System for operations
• General Electric Design for Six Sigma (DFSS)
Organization
Change form, function or activity scope of the firm.
• Cisco partner-centric networked virtual organization
• Procter & Gamble front-back hybrid organization for customer focus
Supply Chain
Think differently about sourcing and fulfillment.
• Moen ProjectNet for collaborative design with suppliers
• General Motors Celta use of integrated supply and online sales
Presence
Create new distribution channels or innovative points of presence, including the places where offerings can be bought or used by customers.
• Starbucks music CD sales in coffee stores
• Diebold RemoteTeller System for banking
Networking
Create network-centric intelligent and integrated offerings.
• Otis Remote Elevator Monitoring service
• Department of Defense Network Centric Warfare
Brand
Leverage a brand into new domains.
• Virgin Group “branded venture capital”
• Yahoo! as a lifestyle brand

CONTINUES IN PART II

No comments: