How innovation really works
Innovation doesn't have to be a high-risk endeavor
“When you innovate, you’ve got to be prepared for people telling you that you are nuts.”
Larry Ellison, CEO Oracle
Innovation can be daunting, difficult, wrought with failure and uncertainty and it's one of the few functions in society that advances humanities. But all innovations aren't equal.
In the new economy, there's an important distinction between innovation and innovation management, and the difference isn't subtle. The flashy and popular headlines typically highlight the former, while the latter encompasses the hard work required the produce a reliable and dependable stream of individual innovations.
We don't have to look far to discover how innovation has and continues to affect our daily lives. With the acceleration of progress, our lives are changing faster than ever. Two companies that have affected us with their continued innovations are Amazon and Apple. Their continued inventions, new services and products shape how we shop, communicate and generally operate.
Let's take a look at a few examples from these professional innovators.
According to Amazon's own statistics, there's a high probability you're a Prime customer. This service delivers shipments to your home within 48 hours and in some locations the same day. Customers also have access to original content created by Amazon-owned studios, streaming music, unlimited photo storage, book sharing and so much more. Amazon will continue to innovate and offer new services because of their structured innovation management approach.
Why does innovation management matter?
According to the data and research compiled by Innovators Equation, conducted on 2,000 of the world's biggest organizations, 63 percent leave innovation to chance. A much smaller group of organizations use the practice of innovation management to create those top-line and gross margin gains that so many companies seek.
Innovation Management, or IM, is the practice of building a rigorous, planned and highly structured approach to building toward future top-line growth, and for achieving other innovation metrics.
IM is a relatively new practice and has been in its own dark ages for the past 20 years with very little common language, supporting statistics for the various approachs, nor agreement that it can be accomplished at all. It can be likened tot he state of "strategy" as it existed in the early 1990s – widely used as a term, a hot topic – but very unreliable or defined unlike it is today.
A majority of all large copmanies around the world do not have any reliable innovation results. In fact, 84 percent of all large companies do not even have a dedicated growth/innovation team. Innovation has historically been a very high-risk endeavor.
But based on our findings, we now know it does not have to be this way.
There is a way for any company to make top-line growth, and other innovation metrics reliable and repeatable.
On January 9, 2001, the iTunes music application was first introduced at the MacWorld Conference in San Francisco. Shaped in the distinct mold of Apple's founder Steve Jobs, the iPod would go on to fundamentally change the music industry and how people enjoy and listen to their favorite music is sold and consumed, how musicians created and distributed their songs and significantly shift the entire music industry to an entirely new paradigm.
IM is broken down into distinct definitions. One end of the spectrum is staying in business while the other is making growth a reliable practice. An innovation department, when structured correctly, will ensure that a company has a future. While we are not used to this kind of thinking, the world is moving so fast now that Fortune 500 sized companies are going under all the time and this pace is accelerating.
Think of the startups that have put legacy companies out of business in the past 10 years. Companies are going out of business at a higher rate than ever today. Others are falling off the Fortune 500 list as they shrink or dont' keep up (while the lifespan of a company on the list was 75 years in 1995, it is only 15 years today!)
Each new product has the potential to be your company's future and each improvement of an old product is necessary just to keep up with competition. So to make sure product improvements and new products are relevant, experts are needed on this subject. Typically, large companies do a decent job of improving old products and almost always fall at new products.
Where staying in business is the low bar, growth and management are the high bar. Changing what you do and how you do it (new products and/or business models) are the only thing that leads to growth. Unfortunately, this practice of innovating has historically been very unreliable. Some people think this fact makes the case for not trying to strengthen or structure their practice. However, the World Database of Innovation research by Innovators Equation initiative has found that those companies that are repeat innovators share a common set of practices. It is possible to make growth a reliable practice by using these common practices.
So what happens without innovation?
The downward spiral we have all seen so many companies enter is unfortunately fairly common. A company falls behind the competition, experiences cash flow challenges, can't invest in much more than minor product improvements (and certainly not game changing, market winning products), falls further behind the competition, has even worse cash problems, cuts most of its creative and best leaders, can't attract new talent, gets a bad public reputation, consumers don't want to be on the losing team and leave in droves, company collapses. This is a very easy place to get to and happens faster than ever today as the cost of entry into most markets gets lower.
There are many ways to run your innovation department – in fact the World Database of Innovation found 27 possible innovation practices. While there is no cookie-cutter approach, combining a handful of these in a way that fits your company culture, industry and time in history will produce a "Growth Engine" or Innovation Management system. This system will ensure you can keep up and stay in business, and if done correctly, will allow your company to grow on demand taking market share, profit share and significant leaps in top line growth.