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Friday
Sep092011

The Elements of Innovation

Marketing and innovation create value, all the rest are costs. -- Peter Drucker

Successful business leaders know that their organizations must continually improve existing offerings and roll out new ones in order to attract and retain customers.  This process of continuous improvement lies at the heart of innovation.  If you’re not innovating, someone else is.  As a result, if you’re not moving forward, you’re moving backward relative to your competition.

Example:

  • Gymnast Albert Azaryan was the first person to do the Iron Cross in international competition.
  • He was world champion on the rings in 1954 and 1958 and the Olympic champion in 1956 and 1960.
  • Over time, the Iron Cross became a common sight in gymnastics routines.
  • Currently on the A – G grading scale (A easiest, G most difficult) the Iron Cross is now graded as a B.

 

The iron cross is still difficult, but it has become a “price of admission” exercise for ring routines.  Those that haven’t taken it to the next level are now left behind.

What is Innovation?

Innovation is the specific tool of entrepreneurs, the means by which they exploit change as an opportunity for a different business or a different service. It is capable of being presented as a discipline, capable of being learned, capable of being practiced. Entrepreneurs need to search purposefully for the sources of innovation, the changes and their symptoms that indicate opportunities for successful innovation. And they need to know and to apply the principles of successful innovation.  -- Peter Drucker

Innovation is a key ingredient in the growth of companies of all sizes and industries.  When you started your business, you did so because you saw an opportunity to do things better than your competition.  That was your first innovation.

A definition is in order: Innovation is anything added to your offering that is perceived by the customer to be new and to add value.  The key components here are the customer, a new offering, and added value.

Your Customer

Successful innovation starts by focusing on what your customer needs, not on what the competition is doing.

The target audience for innovation is your customer.  While this seems obvious, history shows that companies routinely get caught up in technology, industry trends, business or market fads, and end up “innovating” for the wrong reasons. 

If you’ve bought a new HDTV recently you experienced this first hand as you tried to figure out the difference between 1080p and 720p.  As a customer, you don’t care about pixels; you just want to watch Blu-ray movies.  Geeks care about the technical specs associated with new gadgets while most regular people just want the benefit or experience that technology can provide.  Focusing on the experience of the customer and what they’re trying to achieve is paramount.

New Offerings

Innovative ideas don’t always start with new technologies.  Sometimes an old technology applied in a new way can offer more value.

What’s new to you may not be new to your customer.  If your competition beats you to the punch, then you’re not offering anything new to your industry – you’re just keeping up with your competitors.  Conversely, things that are old hat in other markets can offer new value to your customer when applied to your business in unique ways.

For example, tracking the progress of a shipment as it makes its way across the country is nothing new.  However, being able to track the cable guy across town certainly would be!

Added Value

If I'd asked customers what they wanted, they would have said "a faster horse". – Henry Ford

Finally let’s look at value.  The customer is the final judge of value (and innovation) because they alone decide which products and services they are going to purchase. So while a change in your pricing model, return policy, etc. may add value to the company and its shareholders, the customer may not be as impressed. 

Value to the customer means you have solved a problem, made their life easier, or enabled them to do something they hadn’t even thought of yet.  You have to understand your customer before you can craft an offering that they will value.  Creating value requires a combination of marketing and innovation.

Takeaways

  • Innovation sets you apart from your competition.  It gives you something they don’t have.
  • Over time, innovations that are successful and distinctive when they are first introduced become commonplace and even expected.
  • Innovation is an idea or practice that is perceived as new by the customer.

Yes, the economy is shaky, but what better time to focus on new offerings to grow your business.  The biggest advantage of acting now is that it’s easy to stand out and get attention when your competition is running for cover!