Innovation: What is it?

Simply said, innovation is the process of successfully putting a novel concept into practice while adding value for your stakeholders and customers.  

The seed of innovation is a novel notion. It may be a strategy for a new company model, an updated system for managing your operations, or a plan for a better good or service. It need not be new; it could have already been used by another company and can apply to any aspect of your organization.  

Value generation is a prerequisite for innovation. While it’s become a buzzword, innovation does play an important role, acting as a key lever to help a company survive and thrive.

Why is innovation important?

Innovation allows your company to remain competitive. The question is rhetorical. A company that does not innovate is at risk of becoming irrelevant, reducing its productivity, losing customers and ultimately going out of business.

Innovation requires taking stock and measuring impact, whether by qualitative means, like interviews to assess customer satisfaction, or quantitative means, like sales metrics.

Innovation: How can it help your company?

1. Transform your existing business model to adapt to a changing environment

2. Satisfy existing but unanswered market needs

3. Bring new technologies, products or services to market

4. Create entirely new markets

5. React to market disruption

3 types of innovation: Incremental, expansive and disruptive

For a company looking at change, there are three levels of innovation you can implement:

1. Incremental innovation

These are small changes that increase the efficiency of your current business model. Adding that this type of innovation is typically ongoing and can be done in the short term.

2. Expansive innovation

This is change that results from exploring new ideas. Its purpose is to sustain and grow the company in the long term.

Expansive innovation is usually related to science and technology. Many of these innovations that we’re currently seeing will use artificial intelligence or become part of the Internet of things.

Expansive innovation also implies testing and prototyping, as well as evolving the business model. It can take 12 to 24 months to implement. A company should focus about 30% of its efforts on expansive innovation.

3. Disruptive innovation

Innovation at a disruptive level: This is what comes to mind when people think about innovation. It’s the new products and services that are being talked about.

A disruptive innovation is an innovation that creates a completely new business model, offering a novel value proposition.

Real-world Innovators

What are some real-world examples of innovation?

WhatsApp – In 2009, WhatsApp launched a messaging service and platform. The company targeted anyone with a smartphone and an internet connection, regardless of device and location. It disrupted a very competitive messaging market dominated by both telecom and the free desktop messaging like Yahoo! Messenger and Skype. The company operated at a radically lower cost structure and benefited from the growth of smartphone use. In 2013, WhatsApp serviced 200 million users with only 50 staff members. In 2014, Facebook acquired WhatsApp for more than $19 billion.

Salesforce – In 1999, Salesforce disrupted the customer relationship management (CRM) arena by offering CRM-as-a-service over the Internet. Its goal was to make the enterprise software easy to use. Salesforce was visionary in predicting the potential of the cloud, which made it easy to scale to organizations of all sizes and with minimal cost. The company invested in hosting, monitoring, customer support and account management, and benefited from recurring revenues from a service subscription.

Business model innovation

Business model innovation takes place when the processes the business has been using or the way its product is brought to market have been transformed. It’s a challenging type of innovation and is often imposed on a company that has little choice but to radically change. This is not change at an incremental level but one that can threaten elements of the company’s brand.

Airbnb, Uber and Spotify are examples of companies that, respectively, disrupted the hotel, taxi and music industries. Many large operations had to completely rethink their business model because of these innovations.

How can CEOs lead innovation?

CEOs have a strategic role to play with innovation. They can be the true drivers of innovation, but they can also get in the way.

CEOs should allocate a budget and allow a certain amount of freedom for their team to explore solutions. Innovating is like entrepreneurship and entails a degree of creative trial and error. The team, or the employee taking the lead, need to be given some autonomy to play out different ideas.

What are the three stages of innovation?

Innovation projects generally go through three stages: design, testing and scaling.

1. Design stage: This is the time for ideas, where you imagine a new business model or a solution that will address a product or service innovation. You then design a prototype that will become your minimum viable product, meaning it will have enough features to attract early adopters or investors.

2. Testing stage: This is where you quickly test the different versions of your innovation.  

3. Scaling stage: Once the design and testing have shown how your innovation can solve a real problem, you are ready to scale up. In practice, this means developing a detailed business plan based on evidence and making your product or service available to larger numbers of people and launching a dedicated marketing strategy.

Protect your innovation

It’s not enough to innovate. You also need a strategy to protect your innovation and ensure you get the full value from your investment.

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