16-Four innovation classes
What types of innovation create the most value, highlight the need for effective leadership and proven innovation methodologies?
FOUR TYPES OF INNOVATION
Strategic innovation brought to market increases the value of the firm—share price—and its overall share of market capitalization within its sector.
Tactical innovation merely reduces costs or speeds revenue already in your sales pipeline.
Thus, innovations vary a great deal, bringing greater or less value to their organizations or customers.
The figure below depicts the four basic categories of strategic innovation.
Social networking and global business ecosytems have change the innovation game: firms can now innovate business models, products, and processes with customers and partners in an open-systems format that strikes the casual observer as conversational and fun. We call this format Innovation Leadership Academies: fun, open-ended conversations about how to build new operational capabilities directly related to how end-use firms attract, serve, and satisfy their customers or consumers.
–
Business model innovations bring new satisfactions to market or give the innovating firm new ways to capture value. Typically, these innovators disrupt underserved markets by leveraging new technology. While the iPod may represent a stunning product innovation, the iTunes and, later, the AppStore, represent game-changing business model innovations.
Product innovations tend to grow existing markets, using industrial design and brilliant packaging to create highly differentiated offerings. When coupled with a business model innovation, product innovation creates a wealth-creating synergy such as the iPod and iPhone.
Process innovations optimize known systems and procedural workflows, reducing waste, cost, and time, using management process control frameworks such as Lean Six Sigma, ITIL, and CoBIT. When coupled with product innovation, process innovations deliver price leadership and substantial barriers to market entry by competitors.
Social innovations change some elements of how we live, work, or play. In today’s world, many of these innovations entail the rapid development of next practices where small, dedicated groups of people produce and consume small chunks of information and content that become social goods later enjoyed by large groups of users as best practices.
Many companies now pursue innovation strategies across two or more of these four innovation categories, placing new demands for more rapid, error-free innovation-deployment processes—how firms drive their innovations to market.
In all cases, innovation entails change and the need to manage the change wrought by innovation.
Besides product or software innovation, most firms do not have a structured, repeatable process—an operational capability—for innovating new services, processes, or business models.
This deficiency calls for the emergence of a next practice that we call Innovation Leadership.
INNOVATION LEADERSHIP
Adoption of innovation entails change, disruption and, in many cases, addressing resistance to change.
GISTICS research of innovation and how to speed the adoption of innovation reveals several next practices and provisional guidelines that include the following:
- Shared commitment to the mission, vision, and values of the firm, creating an organizational context
- Crisp, cogent, and consistent demonstrations of the firm’s customer value proposition, defining key customers and how they benefit
- Logical sequential steps that most customers take in their journey of discovery, engagement, and satisfaction, structuring the process of value fulfillment used by the firm and its partners to find, serve, and satisfy customers
- Open, collaborative processes that enable affected stakeholders (external parties such as customers and partners as well as internal parties such as sales, service, and engineering or IT) to co-define a proposed innovation, co-validate its value to customers, and co-determine accountabilities for driving that innovation to market and adoption
GISTICS research of masterclass innovators reveals the critical importance of affected stakeholders to co-determine their respective accountabilities in the adoption of innovation.
Accountability for change defines innovation leadership, emphasizing the bottom-up discovery of what’s needed and the collaborative discussion of who will provide what’s needed.
–