Business innovation has been defined as the building of substantial new value for customers and the organization by creatively changing one or multiple dimensions of the business system. This definition leads to three important characterizations of business innovation.
- Business innovation is all about new value and not something new: Innovation is relevant if it only is creating any value for the customers and simultaneously for the firm. Therefore, creation of anything new is neither important or enough for business innovation. Customers are the only ones who make sure of the importance of any innovation by contributing to it. There is no difference made by an organization’s thought process regarding it. What actually matters is if the customers will at all pay or not.
- Business innovation comes in different forms: Innovation can happen on any dimension inside a business system. As an instance, the Home Depot Inc., innovated by targeting those people who are dependent upon themselves, but are most of the time underserved as a consumer segment. JetBlue Airways Corp. has managed to succeed in the US domestic aircraft industry by providing the customers with a better experience that counts in leather seats live satellite television, and smartly dressed flight attendants. Cisco Systems Inc. has managed improving their margins with the help of process innovations like the organization’s capability of closing their quarterly financial accounts on the day when the quarter is ending.
- Business innovation is methodical in nature: Any successful business innovation asks for very minute deliberation from all elements of a business. A good product having a bad distribution channel would be failing in a similar extreme manner like a great new technology that is lacking a valued end-user application. Therefore, at the time of innovating, an organization must take into consideration all the dimensions of their business system.
The Concept of Business Innovation Radar
The article “The 12 Different Ways for Companies to Innovate” by M. Sawhney, R.C. Wolcott and I. Arroniz, published in the MIT Sloan Management Review, Vol 47, No. 3 (Spring 2006) issue has helped to develop innovation radar basing it on the interviews they took of the managers who are responsible for all the innovation-related activities at different large organizations across a range of industries. The participants that were included are Boeing, Chamberlain Group, ConocoPhillips, DuPont, eBay, FedEx, Microsoft, Motorola and Sony. The authors even reviewed a lot of academic literature on innovation for helping in identifying and defining the twelve dimensions of the radar. For identifying the dimensions a broad set of questions were used, that followed well-accepted best practices in metrics and questionnaire design. For each of the dimensions two distinct sets of measures were built – reflective measures for obtaining a complete metric for the real level of innovativeness at every dimension and formative measures for gaining insight onto actions or elements that contribute towards the observed level of innovativeness. From the results it was seen that the reflective measures displayed extreme levels of internal consistency, the formative measures defined a huge portion of the variance for the dimension they were connected with and all the different coefficients in the nomological network had the expect signs. For further assessing the validity of the dimensions, the profiles that came out from the innovation radar were offered to the managers that participated in the surveys.
From the article it could be comprehended that the four main dimensions inside the business innovation radar serving like business anchors are the offerings the organization is producing, the consumers they are serving, the procedures they are employing and the points of presence they are using for taking their offerings to the market. The authors in their research investigated the way organizations would be able to put to use the innovation radar for constructing a strategic approach towards innovation. More specifically, the radar can assist an organization in determining the way their present innovation strategy stacks up in opposition to their competitors. Putting to use this information, the organization can recognize the opportunities and prioritize their efforts accordingly on the dimensions. The authors have workers with a large global bank for benchmarking their innovation profile in opposition to that of their top three contenders in a leading Latin American country. These analyses helped revealing the strengths and weaknesses of each of the organization alongside any good promising opportunities, especially those ignored by the industry as a whole.
Dimensions of the Business Innovation Radar
Innovation is relevant only if it creates value for customers — and therefore for the firm. Thus creating “new things” is neither necessary nor sufficient for business innovation. Customers are the ones who decide the worth of an innovation by voting with their wallets. It makes no difference how innovative a company thinks it is. What matters is whether customers will pay. Successful business innovation requires the careful consideration of all aspects of a business. A great product with a lousy distribution channel will fail just as spectacularly as a terrific new technology that lacks a valuable end-user application. Thus, when innovating, a company must consider all dimensions of its business system.
The question then immediately arises: How many possible dimensions of business innovation are there, and how do they relate to each other?
- Offerings – Offerings are a firm’s products and services. Innovation along this dimension requires the creation of new products and services that are valued by customers.
- Platform – A platform is a set of common components, assembly methods or technologies that serve as building blocks for a portfolio of products or services. Platform innovation involves exploiting the “power of commonality” — using modularity to create a diverse set of derivative offerings more quickly and cheaply than if they were standalone items. Innovations along this dimension are frequently overlooked even though their power to create value can be considerable.
- Solutions – A solution is a customized, integrated combination of products, services and information that solves a customer problem. Solution innovation creates value for customers through the breadth of assortment and the depth of integration of the different elements.
- Customers – Customers are the individuals or organizations that use or consume a company’s offerings to satisfy certain needs. To innovate along this dimension, the company can discover new customer segments or uncover unmet (and sometimes unarticulated) needs.
- Customer Experience – This dimension considers everything a customer sees, hears, feels and otherwise experiences while interacting with a company at all moments.
- Value Capture – This dimension refers to the mechanism that a company uses to recapture the value it creates.
- Processes – This dimension are the configurations of business activities used to conduct internal operations. To innovate along this dimension, a company can redesign its processes for greater efficiency, higher quality or faster cycle time.
- Organization – This is the way in which a company structures itself, its partnerships and its employee roles and responsibilities. Organizational innovation often involves rethinking the scope of the firm activities as well as redefining roles and responsibilities.
- Supply Chain – A supply chain is the sequence of activities and agents that moves goods, services and information from source to delivery of products and services. To innovate in this dimension, a company can streamline the flow of information through the supply chain, change its structure or enhance the collaboration of its participants.
- Presence – Points of presence are the channels of distribution that a company employs to take offerings to market and the places where its offerings can be bought or used by customers. Innovation in this dimension involves creating new points of presence or using existing ones in creative ways.
- Networking – A company and its products and services are connected to customers through a network that can sometimes become part of the firm’s competitive advantage. Innovations in this dimension consist of enhancements to the network that increase the value of the company’s offerings.
- Brand – These are the symbols, words or marks through which a company communicates a promise to customers. To innovate in this dimension, the company leverages or extends its brand in creative ways.
From the research the authors were able to come to the understanding that majority of the innovation strategies of organizations are the outcome of simple inertia or industry tradition. However, if an organization recognizes and follows abandoned innovation dimensions it has the capability of changing the base of the competition and leaving other organizations at a clear disadvantage due to every dimension asking for a separate set of capabilities that would not be possible to be developed or procured overnight. Moreover, innovating along a single dimension most of the tine impacts choices regarding the other dimensions. As the authors carry on expanding their database of the radar profiles, they hoped to be able to assess a wider range of hypotheses. Their research to date backed the idea of successful innovation strategies tending to be focusing on a couple of high-impact dimensions instead of trying a shotgun method along many dimensions at once. Finally, the innovation radar is possibly a solution for guiding the way the organizations can handle the rising complicated business systems via which they have the option of adding value, making sure innovation happens beyond products and technologies. In the process, the framework can go on to become a significant tool for the corporate executives, venture capitalists, entrepreneurs or anyone who is looking for growth with the help of innovation.
Other Key Innovation Concepts
Apart from the innovation radar, there already exist some innovation concepts and methodologies that can be used by organizations can embrace while dealing with key challenges.
Business model innovation: This is generally referred to the creation or the reinvention of the whole business itself. Where innovation is considered something more generally seen in the form of any new product or service, business innovation provides the outcome in a completely new and different form of organization that has the capability of competing not just with the help of the value proposition of their offerings but even aligns their profit formula, processes and resources for enhancing that value proposition, capturing new market share and removing competition. Organizations must have a more holistic method for innovation that extends beyond products and technologies.
Open innovation: It is a philosophy that every organization must embrace inside them. In a more practical manner open innovation is related to the bridging of internal and external resources and acting on those chances. The companies that get this right receive a value proposition that is too good to be missed. It is generally viewed as an umbrella term that contains user-driven innovation, crowd sourcing and co-creation.
Lean startup methodology: This is a revolution that is changing the way new products are getting built and launched. The main idea behind this methodology is failing fast but failing cheap and at the same time developing a minimum viable product for beginning the procedure of learning as fast as possible.
Reverse innovation: This concept assists in understanding what is the meaning behind developing in the emerging markets in the first place rather than scaling down on rich world products for unlocking a whole new world of business opportunities.
Disruptive innovation: This concept comes across a bigger business audience, which is a result of the rising speed of globalization and change. With time, it has become easier pursuing radical or disruptive innovation, but it has become harder to be defending any existing business against disruptive innovation. This form of innovation created a new market and value network, which it eventually disrupts, replacing any established market leading organization, products or partnerships.
Blue ocean strategy: This is a systematic method of changing the status of any competition to irrelevant and outlining principles and tools of any organization that can be used for creating and capturing their own blue oceans. This strategy is mostly involved with the search for any business where very few other businesses operate and there exists no price pressure. This model can be applied across businesses and sectors, not getting limited to just any business. The idea of “Blue Ocean” is basically the market share that businesses attempt and search for in verticals or avenues for any new business in which they would not receive any contest of any kind. The strategy is majorly aimed at capturing new demands and making competition irrelevant by means of introduction of a product with superior features.