I've just returned from an incredibly stimulating four days with one of the worlds premier packaged goods companies. As with many of our clients, their ultimate objective is to transform their innovation efforts and culture in ways that will dramatically enhance their ability to stimulate growth.
As we are finding time and again, one of the critical stumbling blocks to innovation is the lack of a common language regarding innovation -- basic terms that are shared by all within the enterprise to discuss what they are working on, how to classify it, and therefore how to make resource decisions between options.
In our experience, and again in this session, it has been proven that an enterprise needs at least five basic definitions in order to succeed. These five definitions must form the common language for discussion of innovation, goal setting and decision-making. The five key definitions are:
- Innovation what is it? Is it new products and services, or is it more. Do we expect innovation in core processes? business models? go-to-market strategies? etc.
- Incremental (or sustaining, or core) innovation. The base level. How do we define the minimum ante? And therefore, what do we expect from riskier, larger opportunity efforts?
- Breakthrough Innovation. Larger opportunities that will significantly grow our business or our franchise with the customer? Efforts in this area require different approaches, different decision tools, and normally, different resources.
- Transformational innovation. How do we differentiate the really huge, long-term types of innovation that truly transform not only our business, but the world?
- Platforms. Because platforms are often part of the differences in definitions, we need to understand what we mean by a platform.
One of the great things about being an innovation consultant, working with Fortune 500 firms is that I get a chance to participate in conversations and debates over things like this with a wide variety of smart and experienced people. So I always learn something new. That was the case again last week. The experience has helped me to add clarity to my thinking about innovation terms, and hopefully to help others by sharing some of that learning.
The key to innovation definitions is not what others in the world say or think. It is about creating a language that works for the unique organization in which you are operating. It's not enough to create these definitions, they must be recorded, leadership must be aligned around them, and they must be communicated. Most importantly they must be useful distinctions that fit your unique needs. So here is my latest thinking based on these conversations:
Business Innovation is the process of envisioning and successfully implementing new ways of doing anything that creates value for an enterprise and its stakeholders.
There are several keys in this definition that I hope will be useful to you. First of all, it involves strategy and creativity ("envisioning" requires both). Second, it is not innovation until it is successfully implemented. Until then, it's just creative thinking or a nice idea. Third, it must create value for someone important to the enterprise (stakeholders can be the enterprise itself, its employees, shareholders, customers, consumers, etc.). Finally, it is a process. There are five phases or steps in business innovation (discussed in separate blogs -Our Process >).
The next three definitions are critical to resourcing, decision-making, and creating portfolios of innovation. To be useful, they must be:
- Simple and easy to understand
- Clearly distinguish one level from another
- Useful (test them out with your own people using some list of your own projects or examples from the marketplace. Refine them until they actually help distinguish differences)
- Shared broadly within your organization
2. Incremental Innovation
Not all innovation achieves the same goals for an enterprise. And unless everyone understands that there are different levels and that different levels require different resources and approaches, the enterprise will find itself "innovating" but not growing at rates it desires. Incremental, sometimes called "sustaining" or "core" is the base level.
My recent experience helped me clarify, and simplify my own definition:
Innovations that keep your existing offering competitive.
- Sustains (or minimally enhances) market share
- Targets primarily existing customers of your business or the category
- Extends current platforms
- Usually addresses needs the market can currently articulate
3. Breakthrough InnovationInnovations with new value propositions that expand your business into new markets with new advantages
- Creates new market share
- Targets new customers or new usage occasions
- Leads the market with needs that are clearly emerging, but may not yet be articulated by the target
- Creates a new platform (this is less part of the definition than a key criteria for most business innovation. Breakthrough is risky and resource intensive. To be worthwhile, it should have fertility and long-term usefulness)
4. Transformational Innovation
The third level. Some innovation is generally recognized as "paradigm shifting". New products, services or ways of doing things, that once the market recognizes, they will never go back to the old way of doing things. They transform the world, our behaviors and create new purchase habits. Electric light bulbs, automobiles, etc. Because transformational are easier to recognize after the fact, it is difficult to plan for or to pursue them. However, it is useful to recognize them in the conversation.Innovations that transform the world, changing markets and lives forever Transformational:
- Creates a new market
- Creates new spending
- Creates a new industry or category
Most strategies will lean toward a break between expectations for incremental and those of breakthrough or transformational.
At its basic level, platform thinking seeks to leverage some investment over time and multiple revenue streams. That investment may be technological, channel, manufacturing process or equipment, markets or brand equity. There are many examples. The point is, to be attractive, higher risk, more expensive efforts require leverage -- in terms of longevity and/or revenue streams. This will frequently help distinguish between incremental and breakthrough, because incremental generally leverage some existing investment (platform), whereas breakthrough generally require some new investment (platform).
A family of related offers that leverage an initial investment, technology or assets across an envisioned roadmap of revenue streams.
- Be BIG -- whatever is big for you in terms of revenue.
- Leverage a clear asset or investment
- Be Fertile -- you must be able to envision a developmental roadmap that unfolds over time, creating multiple families of incremental derivatives
- Have long-term viability
- Further the Vision and Strategy of enterprise
There are many more definitions that are useful, and many variations on these themes out in the world. The key is to adopt or create those that best work for you, then align all your stakeholders around them and communicate them to everyone who participates in innovation.