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Innovation is implementing creative ideas into valuable or profitable solutions.The famed management guru Peter Drucker defined disruptive, or truly game-changing, innovation as something that yields improvements of at least 10 times, creating a new dimension of performance, a new paradigm. In business terms, the change increases customer or producer value by a factor of 10.
For the vast majority of companies, innovation includes new ideas or methods that generate major cost or value shifts. To progress, companies need not just new product developments, but steady improvements in manufacturing and production, marketing and sales channels, and delivery logistics - anywhere within the enterprise where value is added.
Creativity is developing new ideas. Innovation is implementing creative ideas into valuable or profitable solutions. In other words, innovation happens when organizations make money or gain value from creativity. Effective innovation is the timely and efficient implementation of new ideas that results in significantly increased revenues and profits.
Obstacle paradox
Competition, mistrust and the scarcity of time, money and other resources make it very difficult to innovate. These same reasons make innovation imperative. The obstacles to innovation are the great paradox of the current corporate environment. It is essential to the survival, growth and prosperity of any company to have some means to manage innovation. And yet, the question arise - can innovation be managed?
I remember our brainstorming sessions at Action Instruments - everybody was invited, engineers, production, accounting and office people. New ideas were discussed, with just one rule: No one could say anything negative for at least 10 minutes after an idea was proposed. It was strange how many innovative ideas survived that usual, initial minefield.
Dean Kamen's keynote address at the August 2006 National Instruments' NI Week poked fun at the "management" of innovation - basically saying that innovation requires leadership; but management kills it. Geoffrey Moore's book "Dealing with Darwin" discusses research on how big companies innovate. Moore insists that innovation is not hard; what is hard is deploying innovation, because critical resources are always engaged with existing responsibilities. So, too often, when genuinely innovative ideas come up, they simply die on the vine.
In his book "The Innovator's Dilemma," Clayton Christensen exposes a paradox behind the failure of many business leaders: By focusing on pleasing their most profitable customers, they pave the way for their own demise. How? By ignoring new, cheaper innovations that initially target small customer segments but evolve to displace leading products. Indeed, this is why new leaders emerge with disruptive technologies, while established companies fade away. This innovation blind side has destroyed many giants.
In a follow-on book "The Innovator's Solution," Christensen and coauthor Michael Raynor suggest solutions for the dilemma. Although the emergence of past innovations seems random, the process by which innovations are drawn and shaped within companies is predictable. By understanding and managing the forces that influence this process, companies can develop business plans that create truly disruptive growth. The authors bring up several counterintuitive guidelines: proven managers are ill-equipped to lead fledgling businesses; expect early profitability, not just growth, to demonstrate viability; outsource low-cost commodities, not high-cost proprietary products; segment markets according to what customers want, not by price points or demographics; initiate innovation strategies when business is good, so mistakes can be afforded.
Tom Peters, the "Search for Excellence" motivator, suggests several bold innovation initiatives: Speed of innovation (product development time should be reduced by 50 percent); premium products (differentiated price and value-added layers); streamlined organization (reduction of management layers); paperwork reduction (reduce paperwork and procedures); and motivation (get people on profit-sharing programs).So, what is your company doing to stimulate innovation?
Jim Pinto is an industry analyst and commentator, writer, technology futurist and angel investor. You can e-mail him at: This email address is being protected from spam bots, you need Javascript enabled to view it . Or review his prognostications and predictions on his Web site: www.jimpinto.com
