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Innovation is an important lever for long term organizational and individual success. Especially in the context of corporates today, lacking in innovation could especially mean getting off the competitive band wagon.
Whether a company is manufacturing chips or cars; whether it is producing cola or computers, it needs to innovate to remain relevant in the changing environment. Innovation goes beyond simply product design to the business model, processes involved and organizational strategies.
Victor Fernandes from Natura has defined innovation as something that either creates new value or captures value in a new way. Here the spotlight is on the term value and any new way to create value for business or individuals can be termed an innovation.
Any organization can succeed by fostering a culture of innovation. This would mean developing a framework which helps your employees bring out new ideas in the process of their work.
Another important aspect of developing an organization that promotes innovation rather than hinders it is identifying and categorizing the types of innovation and identifying what innovations are already taking place and what are the types of innovations you need, and how to nurture and develop all of them.
Innovation comes in varied forms and means different things to different people, thus making coherent sense of innovation is slightly difficult unless it is grouped into categories.
Identifying and categorizing innovations and preparing a comprehensive business innovation strategy will help focus resources on a common objective, to avoid wastage of resources and also increase the likelihood of successful innovation.
Innovation can be categorized in two ways. The first focuses on the application of the innovation. This could be a product innovation, service innovation or a process innovation. The product innovations are the most obvious innovations which loom large in the public imagination. Service and process innovations on the other hand may not attract as much attention from the public but are nonetheless critical for business success.
Any innovation in a product or service could be sustaining, breakout or disruptive innovation. Sustaining innovations are those which are incremental improvements in the product or service offered y a business, just to stay in the game. These can be even considered to be variations on a theme. For example, for a company producing industrial cleaners, a sustaining innovation might mean a 10% stronger cleaning agent or for a cement manufacturer it could mean a cement which has lesser setting time compared to original.
Breakout innovations considerably advance the level of play within an existing product category. For example, the netbooks which are considerably more compact than the laptops can be considered breakout innovation. Single serving pods were a breakout innovation in the coffee category which was earlier using drip coffee makers, which themselves were an innovation on the previous percolators.
Though the breakout innovations considerably improve the product or service, they do not significantly change what the product means (what it does in the case of coffee) and do not really expand the customer base in any way. In much the same way, the Motorola Razr, with a cutting-edge design was a breakout innovation from the stables of Motorola and was very popular, but still it was a clamshell phone without much change in the way it was sold or used.
Disruptive innovations can be said to be the leading stars in innovation and are most closely associated with what the general public’s idea of an innovation is. These are the big-ticket innovations that change the game altogether. They significantly change the market behavior and may render the current products or solutions in the existing category obsolete and transform value propositions.
Such innovations have the power to bring the earlier marginal customers or manufacturers into the spotlight and in the centre of the action. iPod which revolutionized the way we listen to music can be called a disruptive innovation.
Disruptive innovations don’t just change the product/service, but they even change how the product is used, perceive, how often it is used and even who uses it. Email disrupted the way we communicated, Starbucks disrupted not only how people had coffee, it changes who, when, why and even the servings people have of coffee.
As is quite evident, each of the different types of innovation provides a different degree of result. The revenue streams from these three types of innovation also differ, while sustaining innovations generally pay moderately in the short term, breakout innovations pay rapidly in the shorter however they taper off in the longer term once the competition catches on. Disruptive innovation on the other hand may struggle at first but potential lead to exponential growth.
What’s more is that these innovations also flourish in different types of decision systems. For an organization having rigid systems, processes and hierarchies, cultivating sustaining innovations may be easy however disruptive innovation may not thrive in such an organizational setup.
In many organizations, disruptive innovations may not get a chance to emerge if the system is build in such a way that the sustaining innovations turn out to be more coveted. If in an organization, the metrices of success of a project are the quality of the deals a team can cut with those innovations rather than the quality of innovations, then the motivation to work towards disruptive innovation (which may not be readily accepted in the market at first) would not exist.
Thus, there is a need to establish varying metrics and procedures for projects with different objectives. Clear and transparent communication before the start of every project, on the actual objectives will also help the teams in identifying the goalposts they’re aiming for.
A clear understating of actual objectives, encouragement of collaboration and a flatter hierarchy for projects aiming for a disruptive innovation will help teams tailor their approaches appropriately. It is also seen that for encouraging disruptive innovations organizations need to put in place different development processes as well as different KPIs. It is also important to develop more flexible and faster approval and funding mechanisms.
It is also important to understand that an organization needs to create an environment where all types of innovations get a chance of success. Tailoring the process of product development, or service offering to give a chance for all innovations will ensure that n organization not only gets immediate, short term rewards from its products but also nurtures future opportunities.
Companies can choose to classify each of their products under development within the framework of sustaining, breakout, or disruptive products. This will help in managing the risks and the rewards as well as expectations.
It is up to an organization to choose to seek a healthy balance of all three or to focus its resources by clearly prioritizing breakout innovations and thus minimizing the exploration of disruptive innovation, which has higher returns, but higher risks involved too.
This framework of categorization of innovations helps ensure that the end results are in line with the organizations’ overall objectives.
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