What kind of innovation?
Imagine a horizontal line which I shall call the innovation continuum.
On the far right side are the radical innovations which create entirely new businesses: the early search engines, tablets, smartphones, electronic books, social media …
In the middle is business model innovation where many important elements in the value chain are significantly differentiated in an existing business. Think Ikea for furniture, Grameen banking for the poor, Starbucks for branded internationalised cafés.
On the far left is kaizen or continuous improvement: like a new braking system for cars, a better tablet, a process that reduces customer waiting time from 10 to 5 minutes, basic online consumer banking.
Between the left and the middle are operational upgrades, expansions into adjacent areas (products or markets), digital technology for invoicing, stock management, client care and much more. Between the middle and the right are significant product-market redefinitions such as AirBnB and Uber.
More radical is better
It is important to choose where your company stands on the innovation continuum. Your strategy will be very different if you have chosen kaizen, a new business model or a radical target.
Even more important is to understand that you must keep pushing your company towards the radical end of the spectrum. “Different” beats “better” and “entirely new” beats a “little different”.
What pace for innovation?
Speed is a second crucial parameter. With the exception of start-ups challenging many an elephant these days, all organisations need to consolidate a change before they start working on a new one. Consolidation time is correction time, perfection time but it should not be relaxation time which is a dangerous luxury.
Faster is better
In many cases first innovators or agile second movers have significant advantages over the thirds or fourths who may easily fall by the wayside or die. Even forms of kaizen (such as the features of a new car or a new smartphone) have to be delivered swiftly and frequently.
“In a jiffy” beats “rapidly”, “brisk” beats “slow”.
The faster and more radical innovation paths are forced upon us by a world in which change in everything is faster and more radical. Opportunities abound as all businesses can benefit from digitalisation and its outcrops in myriads of ways. Threats also abound as new entrants run by techies with new business models threaten hoteliers and retailers, doctors, lawyers and accountants.
Different and fast. Those who have “got it” should pay attention to Amazon who started as a book online retailer, then cannibalised its own core business by entering electronic books. It now holds a colossal 66 per cent of the US online book market (a lucrative and fast growing market). It is likely that book sharing in the form of electronic libraries will soon overtake the sales of e-books to individuals. Be sure Amazon will be there first.
The warning to companies with a history is this: as their strategy changes in deeper ways and faster, what internal changes must they undertake for their new innovation strategies? Entrenched interests and silo mindsets waste a lot of energy. This will water down and slow down any ambitions of faster, more radical change.
Innovation is not an option and its direction and velocity matter tremendously.