Ten possibilities for innovating that can be utilised by everyone: Part one

Innovation can feel like a daunting, overwhelming endeavour. In a busy business with day-to-day problems to mitigate, it often takes a back seat.??

Where are you going to find the time and resources to develop the next whiz-bang gadget? And anyway, why would you? What has innovation got to do with you?– You’re in the business of doing things the way they’ve always been done and it kind of, sort of works (most of the time)?

Innovation is for everyone. Every company can and should be innovating. That doesn’t mean sending rockets to mars or global domination. It means developing a focus on improving the value you offer customers and intentionally and pro-actively growing (or securing and maintaining) your market share or impact.?

It might come as a shock to some but, more often than not, improving the value you offer customers doesn’t involved the products you offer them.?

In the late 90s, an innovation agency called Doblin categorised innovation possibilities. That might feel counter-intuitive to some, since innovation is often seem as something inherently creative, spontaneous and exciting. Categorising innovation possibilities might feel like an arbitrary task, but it can help with thinking about the massive expanse of options in an objective way which allows us to think strategically about where to focus efforts and the implications for organisations.??

While it’s usually creative, it’s rarely spontaneous and not always that exciting. At least not in the sense of high-fives and eureka-moment excitement we might imagine.?

But the secret of innovation is in creating a repeatable, predictable and risk-managed process. That’s what Doblin’s work did, and it often only gets the credit it deserves from innovation geeks like me.??

We’ll cover the first four types of innovation here. The structure of the ten types is unhelpfully asymmetrical for the purposes of two-part LinkedIn articles, but it doesn’t make sense to split them into five simply for the purposes of neater arithmetic.??

The ten types cover three broader categories of innovation:??

1. Configuration: how your business works internally, with the various systems, structures and processes which let the organisation operate day-to-day.??

1. Offering: the core services or products which your business offers to the market.?

1. Experience: how your organisation interacts with the market and its customers. ?

Let’s concentrate on the first category – configuration – primarily because it’s first, and that tends to be a good place to start. But it’s also the version of innovation that is often ignored, misunderstood or actually not considered to be part of innovation at all.?

There are four main elements of configuration innovation:?

1. Profit model: how your business makes money.?

1. Network: how your company interacts with its stakeholders and supply chain.?

1. Structure: the talent, tasks and assets at the centre of the organisation.?

1. Process: how the business goes about getting things done.?

Let’s look at them each in turn and talk about some examples of where they can contribute greater value to your organisation – the ultimate outcome for innovation.?

Profit model?

There are many paths to the top of the mountain. Similarly, there’s more than one way to derive profit from your business operations. If you look at this (rather important) measure of business success, the chances are that the vast majority of your direct competitors generate profit in the same way as you do. Sell a product or service for a bit more than it costs you to produce it, and you have some profit. This isn’t a bad thing, of course, and many businesses enjoy consistent success doing it.??

What it lacks, though, is uniqueness and the ability to generate additional or excess value from income.??

That can come simply from increasing prices. Accepted wisdom on how a given market tolerates price can be based on outdated assumptions, fear of a negative reaction, to name a couple of factors. But what if your product is so valuable that customers can’t (or, more realistically, won’t) live without it? We’re not talking about creating an extortion racket, but pricing increases of even a few percent over a large customer base can deliver exceptional profit uplift.??

Take Gillette, the best pricing model a razor company can get. Jim Collins, in his famous 2001 book Good To Great, cites the company as an example of how to outperform the market. By making the first purchase (the razor handle and a few blades) relatively cheap then charging a premium for the disposable blade cartridges, Gillette created a high-margin juggernaut that became the runaway category leader. Interestingly, the same sector was somewhat disrupted (mildly disgruntled?) with the entry of plucky young upstarts Dollar Shave Club – cheaper blades, delivered to your door, with a cheery relatable brand. So much so that Gillette copied the model with its own subscription service.??

It can take some significant background work to realise this but innovating with a new profit model can give help you win new customers and take a bigger market share. Equally, if your competitors were to adopt this approach you could be waving bye-bye to your customers overnight.?

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Network?

Network innovation can be a faster, lower-cost and derisked way of driving new value. It works by examining your network – stakeholders, partners and suppliers – to leverage value by managing your relative strengths.??

Take Sainsbury’s for example. By bringing the Habitat and Argos brands into the Sainsbury’s stable, it allowed a supermarket brand to rapidly establish a presence in adjacent homeware and consumer retail markets. For Argos and Habitat, it created the opportunity to benefit from the heft of a major supermarket, and all the resource, infrastructure and buying power that brings.?

Johnstons of Elgin, a luxury Scottish cashmere brand, vertically integrated (brought everything in -house – dying, spinning, weaving, finishing) – at a time when competitors were divesting and doubling down on specific aspects of the overall process (weaving or spinning, for example). This meant costs were higher and margins were smaller for Johnstons. But now, in a market where ethics are everything, Johnstons have outstanding relationships right across the supply chain (including with the goat- rearing communities) and full control of their processes. This has helped them achieve coveted B-Corp status, setting them apart in a wider industry that suffers with poor sustainability credentials.??

Innovating in this way is often a long-term play. Clarity about the trajectory of the business and core values is imperative.?

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Structure?

Doblin described this as ‘alignment of your talent and assets’; in other words, how you set up your team, technology and other assets to deliver maximum value. This can include things like incentive models to encourage employees towards certain behaviours and outcomes, to outsourcing given roles or functions for reasons of cost-saving, efficiency or both.?

Perhaps one of the most obvious examples of this is seen in companies like Apple, typically more famous for its category-defining innovations. The culture of innovation at Apple, though, extends to more prosaic matters like its electronics supply chain; much of it is outsourced to third parties which reduces cost (actual manufacturing costs as well as the enormous cost of developing in-house manufacturing capability) and protects margin.?

Another innovation A-lister business is Netflix. Its now famous (or, depending on how you look at it, infamous) HR model upends the traditional command-and-control people management playbook by giving staff a loose set of values and expectations, and demanding exceptional results in return. That even means delegating multi-million dollar spending decisions to people well below C-suite level, entirely rooted in the company’s value of ‘Act in the best interests of Netflix.’ The flipside to this is a zero-tolerance approach to anything less than constant high performance. Or as Netflix puts it ‘The reward for adequate performance is a generous severance package.’?

The way in which you configure your resources internally (assuming they are valuable, rare and not easy to replicate ...i.e. skilled employees) is the most effective means of securing long-term competitive advantage. For talent-rich engineering and technology firms, this is a great place to start as it can unlock capability and enable innovation in other areas, creating a virtuous cycle of value-add.??

Process?

Process innovation is probably quite self-explanatory, but it offers the potential for quite dramatic improvements to your business. Again, the genesis of process innovation lies in disrupting established norms.??

Love it or hate it, IKEA is a brilliant example of process innovation. Whereas traditional furniture manufacturers delivered furniture that was pre-built to a certain standard, IKEA was able to dramatically cut its retail prices by pioneering the flat-pack model. As well as offering customers the choice of cheap furniture and the dubious sense of achievement in having ‘built’ their own furniturecupboard, flat-pack is much cheaper to produce, giving the Swedish company a profitable model that changed an entire market.?

Going back further in time, Henry Ford made it possible for ordinary people to drive their own car through the simple act of process innovation. Instead of small teams of highly-skilled automobile builders, Ford created the car assembly line, with more people responsible for a smaller number of tasks. This made cars cheaper to build, cheaper to buy and ultimately created a global automobile titan.?

For engineering and technology firms, process innovation, particularly process innovation relating to the innovation process, or the product development process can be hugely valuable. This is also a fantastic starting point for innovation endeavours as having a deliberate and fit-for-purpose innovation process is one of the best predictors of innovation performance.??

It’s easy to look at the examples above and wonder if there’s any point to ‘ordinary’ businesses trying to pursue innovation. True, the wild success of Apple, Netflix, Ford and IKEA isn’t going to be the outcome for everyone. But what it shows us is that, with a focus on improving one or two areas of your business, it’s possible to deliver excess value over a long period of time.???

You just need to get started.??

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