Defining Innovation (American Companies Approach)

American companies approach innovation very differently. The American industry puts a premium on big ideas, new products, better ways of doing things, more efficient design and solutions to everything that ails us. All of these activities fall under the general heading of innovation, making innovation hard to define but easy to recognise. Nonetheless, a loose definition of innovation is what makes every American company the same: the search for the new and the next never stops. While innovation may happen faster or differently in one segment versus another, it is celebrated across all industries and is business' highest common denominator.

But how individual companies approach the search for big ideas is what starts to separate organisations into two distinct camps. In a recently released study of corporate innovation conducted by Cheskin and Fitch: Worldwide, nearly 50% of respondents define innovation as delivering unmet customer needs or finding a better way of doing something--and believe it is primarily about progress or advancement. The other half see innovation as an act of inspiration, a process of discovery that is fuelled by imagination--and believe it is really about creating transformative change. These polarized interpretations begin to reveal a critical fork in the road when it comes to how individual American organisations innovate.

In the most basic terms, there are essentially two underlying sources of inspiration for innovation: internal and external. Organisations with an external stance on innovation are inspired to innovate by focusing on unmet customer needs. A genius at addressing underserved markets, the brokerage Charles Schwab is famous for innovating on behalf of customers. The company created a better way for brokerages to serve its clients by stripping away the practices of old-guard financial firms that didn't always have their clients' interests in mind. In the process, they invented the discount brokerage category and reinvented the entire financial services industry. At the other end of the spectrum are companies with a very inward-focused process for innovation--Apple Computer being an easy example. Fuelled by a distinct vision all its own, Apple's approach is less about giving customers what they asked for, and more about giving them what they never expected. The company's highly secretive product development spawns rumour websites and gossipy speculation from analysts and the media, demonstrating that Apple's inspiration for innovation clearly originates internally moving from the inside out.

But don't be fooled into thinking that internally focused innovators are the norm in the high-tech sector, and externally-focused innovators the standard in service industries. Both Dell and Microsoft are very clearly customer-focused in how they innovate, with Dell's founding innovation having centred around letting savvy customers custom-configure their own PCs. And Microsoft is well known for taking 'cool' emerging technologies and actually making them useful to individuals and businesses. Likewise, Starbucks--a company very much in the service sector--has propagated an entire industry through its own internal vision of a cafe lifestyle.

Brands such as Apple and Charles Schwab illustrate that, to a greater or lesser degree, companies tend to look at either external factors or internal capabilities as a starting point for innovation. But so what? Why does this matter to marketers? Because the way American companies innovate has a great deal of influence on the way they market themselves. Companies with an external inspiration for innovation have a different story to tell than their inward-focused counterparts and vice versa. The stark differences between the marketing strategies of Apple and Microsoft (renegade versus problem-solver), Volvo and Volkswagen (safety versus self-expression), and Wal-Mart and Target (price versus fire) are born of their different approaches to innovation.

Companies with an inward focus on innovation tend to market themselves by leveraging their unique design aesthetic, while externally focused innovators market themselves, unsurprisingly, through the eyes of their own customers. While the monolith that is Wal-Mart positions itself almost entirely on price, Target revels in its bold brand iconography--and both are highly successful. But their

different strategies begin with their approach to innovation: Wal-Mart's dedication to operational innovations that lead to lower prices for its customers compared to Target's charismatic ideas and retail philosophy about 'cheap chic'. Similarly, Microsoft wants you to know that your potential is their passion, while Apple's marketing remains more of an invitation to be a rebel with them.

Recognising these differences and understanding their roots in each company's approach to innovation is important to marketers. How a company innovates reveals a crucial piece of its DNA, and that same DNA is undeniably expressed in marketing--including everything from brand strategy to product positioning, and even investor relations. More and more, savvy marketing will require an expert understanding of how a company innovates--perhaps even a participatory understanding of the process.

At its core, marketing is about telling a company's story. How a company innovates is chapter one of that story, making an understanding of the company's approach to innovation the biggest prerequisite to marketing imaginable