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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.


  • 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.


  • 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!


WHAT you do versus WHY you do it

Whenever we meet new people, they inevitably ask, "What do you do?" For us the answer is "software development."

It's not a very compelling answer.  And it's also not the whole story.

Knowing what you do is the easy part. Knowing WHY you do it takes some introspection. For us, we believe that investment in innovation is critical to long-term business success. Software development happens to be the tool we use to make innovation happen.

The video below is a TED talk by Simon Sinek. It reinforces the belief that WHY is much more important than WHAT.

As Simon says, "People don't buy what you do; they buy why you do it."


Three Myths of Innovation

In this world full of noise, we’re conditioned to ignore the little things.  When you think innovation, you may think in terms of big breakthroughs: the personal computer, the electric car, etc.  Using these as a benchmark, you may think that innovation is somehow out of your reach.

You’ve fallen into the first myth of innovation.

Myth #1: It has to be revolutionary to be groundbreaking

You don’t have to start from a blank sheet of paper or think of something that no one else has thought of before.  Innovation can come from making small changes to current ideas that solve specific problems.

Consider the term “overnight success.”  It’s true that innovative companies may achieve notoriety suddenly – after working on their business for years.  The truth is that innovation is an iterative process of solving many smaller problems.  Each small step is attainable, and people may or may not take notice along the way.  But at some point, one small step added to the others will push your product or service into the “breakthrough” category.

Take, for example, everyone’s favorite “innovative” company: Apple.  While the iPod was groundbreaking in the market, it wasn’t all that special from a technological point of view.  Portable music players had existed for decades.  In the 70s, we had transistor radios.  In the 80s, we listened to tapes on our Walkmans.  The 90s brought Diskmans that played CDs.  By 2000, MP3 players existed.  Apple didn’t start from whole cloth to create the iPod.  They took the portable media player and made it a little bit better.  And it changed the industry.

Myth #2: I don’t have innovative ideas

Innovation begins when you acknowledge that things can be better and set an intention to make them so.  If you see problems, you have ideas.  The only difference between a problem and an idea is the language you use to describe it

If you run a company, you already understand your business.  You know your customers.  You know what’s working and what you can make better.  Your problems are the seeds of innovation; you just have to train yourself to look at them differently.

Exercise:  Use the innovation worksheet to capture your ideas.

When Apple entered the MP3 player market, there was a problem: only technophiles bought MP3 players.  The market acknowledged the benefits of the MP3 player –  it was smaller, it could hold more songs, and you didn’t have to carry around CDs.  However, there was a barrier to adoption:  the average user didn’t want the hassle of getting their music onto their computer, maintaining a music library, and figuring out how to get it onto their device.

The market didn’t want a better MP3 player.  It wanted a better way to find and listen to music.

Apple’s solution was iTunes: an easy-to-use piece of software that helped people find music and listen to it.  By switching the focus from technical specs to customer experience, Apple didn’t build a more technologically advanced MP3 player, they created a better way to experience music. 

Myth #3: You have to wait for inspiration to strike

More often than not, inspiration doesn’t happen out of the blue.  You have to go looking for it.  Actively search for opportunities (sometimes disguised in problems) by listening to your customers, your employees, and yourself.  Anytime you want to change something, anytime you are frustrated with something – recognize the frustration as a possible opportunity to innovate.  Write it down.

This is where many people get stuck.  When they can’t see an immediate solution to a problem, they assume it can’t be solved and work around it.

To be innovative, don’t worry about HOW to solve the problem, first envision what could be accomplished if the problem was magically solved.  Would you make money?  How much?  What would the customer experience be like?  What does that mean to your business?

Exercise:  Use the innovation worksheet to capture envisioned outcomes.

Quantifying the outcome gives you a ruler you can use to determine how much energy it is worth to try and solve that problem.  If the opportunity is substantial, it may be worth brainstorming, involving your employees, or hiring a consultant to help you find a way to innovate.

The bottom line is there’s no secret to innovation.  It’s attainable for anybody, and you don’t have to wait for it to happen.  You can chose to make yourself more innovative by implementing a repeatable process in which you acknowledge opportunities and allow yourself to imagine what could be achieved if you realized them. 



We believe that innovation is a source of business growth.  In the words of Peter Drucker:  "Marketing and innovation create value, all the rest are costs."

It's not as hard as you might think.  Your ideas are a primary source of innovation.  These ideas come from insights you have into your business and your customers.  Every problem you see is an opportunity to make change for the better.  Every opportunity you identify is a chance to innovate.

We believe you can create a culture of innovation by acknowledging your ideas and deciding to act on them.  It doesn't happen by accident; innovation is a repeatable, intentional process of identifying opportunities, evaluating outcomes, and strategically investing your resources to achieve a return.

Sometimes technology can play a part.  But as Jim Collins has pointed out:  "Technology by itself can't make a company or leader great.  The role of technology is to accelerate greatness that's already there."

Since 1992, we've helped companies of all shapes and sizes build software to turn their ideas and insights into innovation.  Our goal here is to share our experience and help you, the reader, understand how to transform your ideas into business innovation.

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