What is Innovation?
In the business world, not a day goes by where the word innovation isn’t thrown around like a frisbee at a summer BBQ.
Many startups have innovation embedded in their DNA and live in an “innovate or die” state of mind.
On the flip side, very few enterprises have been forced to innovate over the last 30 years.
Things are changing.
With startups cutting into more and more of enterprise profits, larger corporations – often household names – can no longer afford to sit back and wait for innovation to simply happen.
Consumers crave it. In fact, 63% of respondents to a Nielsen survey say they like when manufacturers offer new products.
End users expect highly customizable solutions to their problems and only a small percentage of businesses are delivering.
But first, let’s define innovation.
Innovation vs. Invention
Do B2C and B2B define it differently? Do startups have their definition of innovation while enterprises have their own?
Regardless of industry, profession, or type of business, there isn’t one agreed upon definition of innovation.
Although many common points do exist, 15 innovation experts couldn’t even give one consistent definition of what innovation means in business.
The best definition I found came via EY who defines innovation as:
“Innovation is a collaborative, structured process that involves different parts of the organization, as well as outside partners, to contribute, create and exploit new opportunities and find new ways to solve complex problems. The sole action of generating ideas is not innovating. An idea only becomes an innovation when it has been implemented in a form that generates value.”
To put it even more precisely, they go on to say:
“Innovation is the art of making hard things easy and creating value where it did not previously exist.”
Further complicating the discussion is the common confusion of innovation with invention. While equally important, innovation and invention are not one and the same.
Invention occurs when a product is created through a process of design and experimentation.
(Source: Surbhi S: The Difference Between Invention and Innovation)
While innovation may also involve the process of design and experimentation, the end product will be an enhancement of something already in existence.
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Innovation in Business
With technological advancements like cloud computing, artificial intelligence, and machine learning, businesses tapping into these are coming out on top while those that don’t find themselves closer and closer to extinction – remember Blockbuster? Circuit City?
Business innovation occurs when an organization introduces new processes, services, or products to affect positive change in their business. This can include improving existing methods or practices or starting from scratch. Ultimately, the goal is to reinvigorate a business, creating new value and boosting growth and/or productivity.In a perfect world, the ideal environment to foster business innovation would be one that promotes a culture of creativity and collaboration. Catherine Plano of Start-up Nation describes the ideal innovative business culture encourages and supports the following characteristics:
- Collaboration and Play
- Goal Setting
- Planning and Accountability
- Rewarding creative engagement
Why is Innovation Critical to Business?
Rapid innovation is no longer … Businesses both small and large have access to the same technology and resources. Innovation now becomes the key competitive area of focus for businesses looking to extend their shelf life.
For businesses to remain competitive, they need to be open to the needs of customers and team members alike, while being aware of emerging trends in the marketplace that will allow them to remain current with their product offerings. Daniel Nolan breaks this down into the 6 Reasons Innovation is a Survival Skill:
- Increasing Competition
- Increasing Globalization
- Increasing Consumer Expectations
- A Changing Workforce Demographics
- Advancing Technology
- Changing How We Work
Types of Business Innovation
Business innovation can be broken down into four primary categories, which are determined based upon the role of technology in the process, and on the extent to which it previously existed in the marketplace. Jorge Lopez defines the four categories of business innovation as follows:
Incremental Innovation – Utilizes existing technology to increase value to the customer in an existing market.
Disruptive Innovation – Applies new technology or processes to your company’s current market will often be inferior to existing market technology.
Architectural Innovation – Takes the lessons, skills and overall technology and applies them to a different market.
Radical innovation – Revolutionary technology giving rise to new industries.
(Source: Jorge Lopez Types of Innovation)
Why Do Some Businesses Resist Innovation?
Fear. Fear of criticism, of failure, even fear of success. It’s human nature to resist change and to avoid risk.
In addition to the human condition, there are also practical reasons businesses resist innovation, even when we know it’s a critical element to continued success.
Risk aversion and complacency are two key reasons businesses avoid innovation.
Oftentimes, we simply over think it – assuming that the end can’t possibly justify the means.
To be truly innovative requires significant investment, in both capital and personnel.
Unless you’re serious about investing in it, innovation becomes just another buzzword – something that all too commonly happens within well-established organizations. Executive and management teams get employees bought into an idea or methodology, excitement grows, and then poof, nothing happens.
We immediately revert to old habits, keep focus on core business competencies, and innovation takes a back seat – and it’s not too uncommon for this cycle to repeat itself, creating this culture where once new and exciting opportunities turn into a case of “in one ear and out the other” any time its resurfaced.
There is no magic innovation wand.
Put systems in place that enable your employees, customers, stakeholders, investors, and outside consultants to collaborate around innovation.
“The tools are usually right there. Problems arise when people don’t use their imagination because they end up making things too complex. But everyone has the ability to make innovation happen.” – Jack Burton, Burton Snowboards
Tools for Business Innovation
According to a National Science Foundation study, only 15% of an estimated 1.3 million for-profit companies introduced one or more products or process innovations between 2012 and 2014. These rates are very similar to those between 2009 and 2011.
Simply acknowledging innovation puts you at an advantage when you take these stats into consideration.
Just as it’s important to invest in innovation, it does you no good to make those investments and expect an immediate return. We can follow best practices until we’re blue in the face but the fact of the matter is: Innovation is not a science.
Failure will occur.
Depending on the velocity at which you’re creating new products, you may very well see more failure than the “next big thing” and that’s something you’ll have to learn to come to terms with.
Just as we’re agreeing upon embracing innovation as a means of growth, we too must embrace failure and put ourselves in a position to learn from…
The Importance of a Defined Process
A defined process is critical to the success of any innovation.
According to EY data, 63% of organizations either have no defined decision‑making process and framework, or one that is partially defined but not implemented.
Your innovation process should be separate from other business processes, but in alignment with them at the same time.
McKinsey & Company believes that any company serious about innovation needs to master each of the following Eight Essentials of innovation performance:
- Aspire: Do you accept innovation-led growth as absolutely critical, and do you have cascaded targets that reflect this?
- Choose: Do you invest in a coherent, time-risk balanced portfolio of initiatives that are resourced to win?
- Discover: Do you have actionable and differentiated business, market, and technology insights that translate into winning value propositions?
- Evolve: Do you create new business models that provide defensible, robust, and scalable profit sources?
- Accelerate: Do you beat the competition with fast and effective development and launch of innovations?
- Scale: Do you launch innovations in the relevant markets and segments at the right magnitude?
- Extend: Do you win by creating and capitalizing on external networks?
- Mobilize: Are your people motivated, rewarded, and organized to repeatedly innovate?
They go on to state that top-quartile innovators are far more likely to have strong practices consistent with the Eight Essentials versus lower-quartile innovators.
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The Impact of Technology Tools
Technology can ease the workload at each stage of the innovation process. Streamlining mundane tasks and minimizing opportunities for human error.
As we touched on earlier, advancements in technology over the last several years have made it easier for businesses to innovate.
Cloud computing makes it easier to deploy systems and keep us connected.
Artificial intelligence and machine learning make it easier to process immense amounts of data quickly – something that was nearly impossible without massive resource pools prior to this technology.
With this data and these technologies, it becomes possible to create/update software better and faster than ever before. The chart below looks at traditional software delivery in comparison to continuous software delivery.
In addition to optimizing our speed-to-market, we can test go-to-market strategies and go from idea to product faster than ever before.
(Source: Finding the speed to innovate, McKinsey & Company, 2015)
Read more: 3 Areas of Product Development Being Impacted by Artificial Intelligence
Notable Business Innovations of Late
When we apply the various tools of technology, the opportunities for innovation are limited only by our imagination. The following are just a few examples of how different industries are harnessing the power of these new technologies for continuous improvement.
Innovations in healthcare technology are constantly evolving. According to Marketresearch.com, an estimated $117B will be spent by 2020 in applying tools such as the internet of things (IoT), blockchain, and edge computing to the improvement of patient care and streamlining of the healthcare process.
Recent examples include:
- Technology tools such as chatbots and virtual reality have made it easier than ever for patients to access fast, efficient healthcare that would otherwise be impeded by the need to schedule an in-person office visit and/or travel long distances.
- The Cleveland Clinic recently released a report listing the top ten innovations in healthcare for 2018. Among them is what is being touted as the first “artificial pancreas” : a closed loop system for monitoring blood glucose levels in diabetes patients. The technology takes patient responsibility out of the process by having the continuous glucose monitoring device communicate directly with the insulin pump.
- Healthcare data has traditionally been stored in centralized cloud databases. Often, the high volume of traffic to these centralized sources lead to a slowing of access to the data, and thus a slowing of patient care. Recent innovations in the use of edge computing have streamlined access to critical data used in researching patient history, pinpointing diagnoses, and even remotely monitoring wearable medical devices.
Energy and Sustainability
With climate change on the rise and natural resources dwindling, innovation in the environmental sector is more important than ever.
The following are a few recent innovations in energy and sustainability:
- Scientists at Poland’s Warsaw University of Technology have developed B-Droid Robotic Bees, a solution to address the world’s declining honey bee population. Through communication with a central main computer and onboard sensors, these quadcopter drones (ha!) efficiently transfer pollen between plants.
- PowWow Energy has developed an app to aid farmers in decreasing water waste and increasing crop irrigation efficiency. By monitoring existing water sources, the app can immediately alert the farmer to any pipeline breakages or other impediments to the water supply.
- Global Fishing Watch uses AI to track the location of more than 30,000 commercial fishing boats and uploads the data to an interactive map. This data allows seafood suppliers to identify sustainable sources, as well as allowing researchers to monitor the impact of conservation policies.
Travel and Tourism
In the ever competitive industry of travel and tourism, customer satisfaction is the driving force for innovation. Apps, wearables, and augmented reality are just a few of the tech tools being used to create the optimal customer experience.
Recent travel and tourism innovations include:
- Carnival Cruise Lines has developed a wearable that will track customer preferences via a coded wristband that syncs with a companion app. The data collected allows the cruise line to offer targeted options for experiences and purchases and ultimately to provide a more personalized experience for passengers.
- Mariott hotels have launched VR Postcards in several select properties. This virtual reality amenity allows guests to choose from a variety of immersive, 3D travel experiences, all from the comfort of their hotel room.
- Pilot Speech Translation is easing language barriers by pairing wireless noise-canceling earbuds with a cloud-based app that can access up to 15 languages in 45 dialects for real-time translation.
Financial technology or Fintech as it’s often referred to is a booming industry aimed at continuously improving security over financial information, while also optimizing customer experience in a crowded and competitive marketplace.
Recent technology innovations in the finance world include:
- Cryptocurrencies such as Bitcoin which use encryption to generate units of currency and validate transactions without the aid of a centralized financial institution, allowing more streamlined peer to peer online transactions to occur.
- Initial Coin Offering (ICO) is essentially cryptocurrency meets crowdfunding. Using blockchain technology, ICO allows start-ups to raise revenue without resorting to public stock markets or venture capital.
- Digital financial platforms such as Paypal, Venmo, and Stripe create a seamless user experience for consumers and vendors alike by centralizing the user’s banking information, so they are not required to enter it every time they engage in a transaction.
Building and Construction
Technology innovations in the building and construction industry are focused on increasing project efficiency, workplace safety, and project workflow visibility.
- Use of drone technology to survey and measure large job sites. The aerial photo capability of drones allows for more accurate and efficient data collection.
- Construction site robots such as bricklaying robots and autonomous track loaders are being used alongside their human counterparts to improve productivity and reduce injuries.
- Virtual reality is allowing 4D interaction with job sites. This technology allows key stakeholders fully immersive interaction throughout a project, resulting in improved worksite safety and efficiency.
While some look at innovation as nothing more than an unnecessary and distracting buzzword, numbers don’t lie.
Innovative businesses are chewing away at big brands to the tune of $18 billion between 2009 – 2014 according to the Boston Consulting Group.
To become competitive and enable growth by way of innovation, businesses must create innovation-specific processes, become closer than ever before with customers, invest in innovation, staff with innovation in mind and start letting outsiders in, and insiders out, and embrace technology.