Dealing with innovation myopia
Want to know your innovation IQ? Then answer the following true-or-false questions.
1. Innovation is the modern term for invention.
2. Innovation refers to the newness of something a company has launched.
3. The higher the R&D (research and development) budget, the more innovative a company is.
4. The higher the number of patents filed, the more innovative a company is.
5. Innovation requires technology.
6. Innovation is largely dependent on ideation.
7. Innovation is about creativity.
8. Innovation is about continuous improvement.
The answer to all eight of these questions is “false.” Let me explain why.
1. Innovation is the modern term for invention.
Invention is about something new. Innovation goes one step further and includes commercial success. There are many inventors, but only a few really become innovators. Hence, in formulating something new, there is a need to ensure there is enough newness, as well as enough customers who would be willing to use and pay for the newness. An understanding of how to invent products is not enough. An understanding of how customers will benefit, and the value they will derive beyond the cost, will complete the transformation of invention to innovation.
2. Innovation refers to the newness of something a company has launched.
Perspective is important. Newness should be launched in the entire industry; it cannot simply be inside the company. A new thing inside the company may already be existing in the marketplace, hence, technically, a firm will be in catch-up mode, not in innovation mode. Just look at the number of digital transformation projects companies were forced to adopt during the COVID-19 pandemic not just to serve their customers but also to ensure they won’t be left behind by their more visionary competitors.
3. The higher the R&D budget, the more innovative a company is.
As a percentage of 2020 revenues, the R&D budget of Apple was 6.4 percent of total revenues. IBM’s, on the other hand, was 8.6 percent while Microsoft’s was 13 percent. Each company has their own innovations, but can you name the many recent innovations of Apple vis-à-vis IBM? What about vis-à-vis Microsoft? R&D is an investment in the future capabilities of a firm, but more investment does not automatically equate to more innovation. The R&D investment needs to be first transformed into products, services, processes or business models relevant to customers, then product advantage converted into market advantage.
4. The higher the number of patents filed, the more innovative a company is.
Patents are intellectual property rights granted to inventors, regardless of whether the intellectual property has been used or launched. Requirements for newness are evidence that it is substantially different and not obviously the same with what’s already available. Without commercial success, the patents cannot be considered innovations, hence, patents should be considered as a throughput instead of an output metric.
5. Innovation requires technology.
Innovation offers new value to the customers. Value may or may not come from technology.
Starbucks, for example, is an innovation in the coffee industry as it created a new market category, it is not about technology. Technology is not the only answer to innovation. Prior to Netflix streaming movies, it was delivering DVDs by mail, the first company to successfully do so, challenging market leader Blockbuster with over 9,000 retail stores.
It combined a low-tech mailing service that gave consumers convenience without charging late fees due to their subscription revenue model (start doing), bypassing retail stores (stop doing) then-dominated by the market Goliath, who has since filed for bankruptcy. Netflix showed not just innovation but clarity of strategy, becoming distinctive in the marketplace.
They were not just better, a trap seen in strategies of many companies, they were also different, both in their low tech (mail) and the more recent high tech (streaming) strategies, allowing them to reach more customers, while reallocating increasing postage costs to IT investment.6. Innovation is largely dependent on ideation.
Ideation is about ideas, the input needed before an invention or acquiring a patent. To create innovation, firms need to have a way of screening and prioritizing ideas submitted, based on clearly defined decision criteria, to ensure there won’t be any innovation blind spots.
Ideation is just a brainstorming process, without execution necessary to convert into an innovation.
Companies need to ensure they are not limited to product or service innovation, using the 11 building blocks of a business model to offer innovative ideas. Companies should also not fall in love with input metrics like number of ideas submitted and need to distinguish among different terms like design thinking versus agile, pretotyping versus prototyping, and even innovation tools like Franken, mechanical Turk, Pinocchio, one-night stand, impostor, etc.
7. Innovation is about creativity.
While both are needed, creativity is the act of generating new ideas, but it is not the same as innovation. In other words, creativity is a prerequisite to innovation. An environment or culture of creativity happens when people in a company are allowed to develop or enhance new vision, question the status quos, form new combinations previously unconnected, deviate from the norm, and go beyond the usual boundaries and structure while psychological safety is assured, instead of settling and following the industry logic.
8. Innovation is about continuous improvement.
Incrementalism is another term for continuous improvement. It does not generally challenge the norm to offer anything novel but simply improves on what is existing.
While incrementalism is not innovation, it does have a benefit. The context of commercial success required in innovation is not about being the first to launch, or the first to market, but the first to succeed. While incrementalism is not the same as innovation, it may lead to innovation.
The benefits of having mental clarity and not having innovation myopia is important. Your mental models help you focus and prioritize choosing the right route to the future and get the right things right to attain the desired vision quicker.
Instead of practicing the Law of Foolish Fellowship in business where almost everybody follows the industry logic and competes the same way, identify what to do and what not to do in order to be not just better but different. Challenge what’s obvious to you, even if not very obvious to others, instead of having self-doubt. —CONTRIBUTED
Want to learn more about some of the top Filipino innovators redefining their industries? Read their stories on mansmithinnovation.com Josiah Go is the chair and chief innovation strategist of Mansmith and Fielders Inc. He will be speaking on “Discovering, Innovating, Shortlisting Opportunities” starting Oct. 6. Enrollment ongoing via mansmith.net
