Innovate vs. Iterate

Innovation has received a lot of attention in recent years. A quick look at Amazon turns up a list of books – from classics like the Innovator’s Dilemma and Blue Ocean Strategy to tens of thousands of books most of us have likely never heard of. Today, a large number of companies are talking about their innovative capabilities and implementing innovation practices, but many of them are not quite hitting the nail on the head.

With such an emphasis on the idea, it’s worth looking at innovation, as well as other non-static business practices, to see how they apply to your business, and perhaps reduce the confusion.

Innovation

The first place to go when looking at the concept of innovation is understanding the definition, and here’s where the confusion begins. The Oxford dictionary defines innovation as “the action or process of innovating”. Not very helpful.

Among a number of other sources, businessdictionary.com adds this definition: “The process of translating an idea or invention into a good or service that creates value or for which customers will pay.” This gets us closer, but still leaves us a little ambiguity with the word “idea”, as that could refer to any little thought. For the sake of this article, let’s tweak that definition, and use this for reference:

Innovation is the process of translating an invention or a truly novel idea into a good or service with value.

With such a simple definition, why the confusion? Because innovation is hard.

Innovation requires not only coming up with something no one has done before, but also finding a way to create value with it. This makes it difficult for two reasons:

1)     Coming up with something no one has done before is rare. 

2)     Turning that rare novelty into value is hit or miss

Nothing New Under the Sun

The book of Ecclesiastes, written thousands of years ago, tells us there’s “nothing new under the sun”. Solar power? Done by plants for eons. The light bulb? Lightning bugs and torches. The iPhone? Shrinking a computer to fit in your palm.

The novelty or invention, as it turns out, doesn’t come from some singular new thing. It generally comes from some novel combination of concepts. 

·        Solar power? Harnessing solar radiation, just like a leaf, and transmitting it to your home wiring or the power grid. 

·        The light bulb? Using electricity to heat up filaments of known materials inside a vacuum. 

·        The iPhone? Combining telephone technology with wireless technology, touch screens, and all the “technology-shrinking” ideas that have come along to date. (And Apple wasn’t even the first to do this.)

It’s easy to add a new button to your product, tack on a related client vertical to your sales strategy of an existing product, or bundle two of your services together, and call it innovation. In reality, though, those examples are iterations – which we’ll touch on below.

The Midas Touch

Turning the novelty into value is a topic that fills thousands of books, so this short article isn’t the best place to outline the strengths of organizations that seem to turn everything to gold. It’s safe to say, though, that these organizations must have flexibility and creativity, as well as a willingness and ability to take financial risk in order to market innovative products and services.

Iteration

Flamin’ Hot Nacho Doritos. Windows 10. The 2020 Porsche 911. They’re the same, but new. These great examples of iteration help keep PepsiCo, Microsoft, and the Volkswagen Group in business.

It is very important to recognize the value of iteration. The products and services put out by your organization always have infinite room for incremental improvement or iteration. In the case of Windows 10, the new version provides new capabilities that PC users can benefit from. A new flavor of Doritos may be just the snack you’re craving. That next iteration of the 911, first introduced in 1963, incorporates new safety features, updated technology and running gear, and happens to have some design updates as well.

Iteration is a tool that allows an organization to stay competitive in a packed market, or adapt when a competitor changes approach.

It’s important to look at the difference between innovation and iteration here. Flamin’ Hot Nacho flavor might be an idea in itself. Adding it to the Doritos product lineup is also an idea. But the resulting combination is a new version of something that already exists – an iteration of Doritos.

By contrast, the idea of the original Doritos themselves – the process of creating a corn chip, and Doritos’ unique way of manufacturing and flavoring them – could be considered innovative.

Why the Distinction?

If this just seems to be an exercise in semantics, there is a point to all of this, beyond making you crave Doritos.

Organizations (and the people within them) seem to think of innovation as a magic elixir that will elevate them above their competition. Some will promote their innovative nature to their end customers or partner organizations. Others will add it to their quarterly or annual reports to build shareholder support.

(In the spirit of “nothing new under the sun”, innovation is being used as just another term in a string of buzz words like synergy, paradigm, and transformation – all of which had real meaning until they were used incorrectly so often they became squares on the “meeting bingo” game sheets.)

However, when an organization promotes innovation but practices iteration, their shareholders, customers, and partners are misled – and they know it. Ultimately, shareholder support and market share suffer because it is difficult to trust an organization that says one thing, then does another. A customer expects the new product to be a quantum leap ahead, because the organization is focusing on innovation. Yet, the new product just contains a few feature updates. Financial results don’t improve, disappointing shareholders.

What to Do?

When looking at product or service strategy, it’s important to look at your organization’s strengths and resources. 

Clues that you may be able to pivot to a strategy around innovation:

·        You are in a cash position to take financial risks

·        Your organization or R&D (innovation) department has latitude to experiment, reduced oversight, and a creative, ingenious staff

·        Competition and products or services in your marketplace are stale

·        There’s room in your marketplace for high margin products or services

Clues that iteration is a better approach:

·        Your organization has high overhead and/or a tight hierarchical structure

·        You compete in a crowded, low-margin marketplace

·        Your customers expect an iterative approach, preferring more of the same rather than trying something new

If you choose to explore a shift to an innovation strategy, be extremely deliberate about setting up the right structure. The two approaches have radically different requirements, and going part way could mean failing on both the innovation and iteration fronts.