24 Sep Let’s Be Honest- Is It Really Innovative?
A hyperconnected population driven by massive and rapid technological change has collapsed product life cycles. The shelf life for a product or service is the shortest it has ever been. The customer is more difficult to satisfy than ever before. And how could they not be considering the changes that software consumption has made to buyer behavior? Many of the products consumers interact with every day – apps like Gmail or hardware like the iPhone – are constantly evolving. Evolution here equates to consistently and regularly increasing the value of a product or service over time. Think about it. Free improvements to these applications come every few weeks directly to the device. The consumer today expects updates and big sequels to products and services in a short amount of time.
These new expectations mandate that organizations abandon incremental innovation and replication in favor of breakthrough and disruptive innovations. Why is drastic innovation so important? Because many companies are playing catch up in. The service industry in particular is being left behind as its customer drastically morphs right in its hands. Most thought leaders now proclaim the current economy to be the Innovation Economy.
There’s another important aspect of the shift: where innovation will occur. Historically, when we think about innovation, we presume it’s a bright shiny object in the form of a new technology or product. The new breakthrough innovations will have more to do with enterprise innovations that destroy past business, delivery, and connection models than they will with products or services. The shift will be clunky for many organizations because they have developed a tremendous amount of compartmentalization when it comes to innovation. This shift will require that organizations develop enterprise innovation as a strategic pillar, not a strategic initiative.
Just look at the numbers.The National Science Foundation’s 2008 Business R&D and Innovation Survey (BRDIS) covered approximately 1.5 million for-profit companies. Its data tells us that 66% of these companies were product innovators in the 2006–08 period. Do you think this number has decreased or increased since then? There are also telling signs that the companies with the most R&D spending (those in the $50–$100 million and $100 million or more annual R&D categories) report the highest incidence of innovation: 76% and 81%.
You might be wondering how innovation is actually measured and defined in this study. The definition was composed by OSLO, the Organization for Economic Co-operation and Development and Eurostat (the statistical office of the European Union). OSLO defines innovation as “the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organizational method in business practices, workplace organization or external relations.” If you compare your own organization with 100% honesty against these standards, does it hold up? Have you reached the level of innovation that positions your business as a leader in its industry? Have you gotten to a place where this no more room for improvement? If you can answer yes to all these questions, then you don’t need this book. You are an innovation master and I can happily suggest you continue on your way. If not, then keep reading.
You may have noticed that in this study, R&D played a significant role in fostering innovation. This has undoubtedly changed. You no longer need traditional R&D to innovate. Thousands of companies are now doing R&D for you and disseminating that information to the internet for easy and free access. Many of these companies are also showing that innovation doesn’t simply come in the form of engineering advancements at the manufacturing level. Workplace culture, marketing methods, pricing models, and even office layouts have all been proven to significantly affect the ability of your organization to innovate. Product and service improvement don’t only occur in the lab, but also in the very social and operational fabric of your companies. Even if we stick closely within the realm of R&D innovation, it’s telling that companies that in the past were heavily dependent on traditional R&D have been forced to change the way they research and develop.
For instance, Procter and Gamble, one of the oldest and most innovative companies in the world, has relied heavily on traditional R&D in the past. While R&D remains a component of its overall strategy, the need to innovate on Tide, a product that remained the same for more than 50 years, forced the company to rethink past methodologies. Procter and Gamble has innovated on innovation. What I mean by this is that in response to the Innovation Economy, the company has had to transform and accelerate the ways in which it has grown accustomed to innovating. Its solution to this new challenge? “Open innovation.”
What is open innovation? P&G defines the term as “a way for companies to harness the ideas and strengths of people outside their organizations to make improvements to internal processes or products.” This approach has become a natural and effective response to the speed and advancement the new economy demands. What’s most ingenious about this model is the way in which it uses the changing times to its advantage. P&G’s “Connect+Develop” initiative taps into the hyperconnectivity of the age and leverages it on the internet to access the wide expanse of resources that globalization affords. Moreover, open innovation is a type of crowdfunding and collaborative creation. It takes the old adage that “two heads are better than one” and applies it to enterprise management — think of it as “two organizations are better than one.”
Historically, companies like P&G relied on internal resources and teams to develop their latest products and services. This won’t work anymore. Connecting with external partners is absolutely necessary. The company is asking for help in unconventional ways – for example, using forums or getting knowledge from experts in seemingly unrelated fields. Hyperconnectivity has allowed access to the greatest think tank humanity has ever seen. To dismiss and overlook this resource would be downright stupid. Realizing this and asking for help with innovation is the first step to producing product and services with value that result in industry leadership.
Companies like Google, Apple, Valve, and countless startups also represent this shift, but what’s significant about P&G’s approach is twofold. First, the company is a long-established, classic, and heavy organization. It’s not the first company you’d pick if you were creating a list of businesses you think are ripe for innovation. Yet, P&G threw a wrench into the idea that you can’t teach an old dog new tricks. Second, that company highlights the necessity for innovation and innovative approaches in this new economy. The Innovation Shift is calling out for drastic changes that can’t be achieved with incremental organizational improvements.