What is Innovation?
“What gets measured gets managed.” This maxim from management sage Peter Drucker, while insightful, overlooks a preliminary step: Before you can measure something, you have to name it. This requires defining and establishing clear boundaries around the thing to be named. If done well, this makes measurement of that thing possible.
The importance of clear naming might seem self-evident, but it is often overlooked in the business world. In no domain is this truer than that of innovation. Consider the word “innovation” itself: While the meaning of the word might seem intuitive to most people, in practice there is far more confusion than clarity around it. This has profoundly negative consequences for leaders and organizations, and frequently hinders them from making progress toward their innovation goals.
Many definitions have been offered over the years, but the number and variety of them can perplex even the most studious leader. One of the most enduring definitions is Clayton Christensen’s concept of a “disruptive innovation,” which he contrasted in his classic book The Innovator’s Dilemma with “sustaining innovations.” Since then, a veritable menagerie of types has emerged. There are open innovations, reverse innovations, incremental versus adjacent versus radical versus transformational innovations, product versus process versus marketing versus business model innovations, and organic versus inorganic innovations. One consulting firm claims there are “ten types of innovation.” Another firm claims that there are more (15), and still another asserts there are fewer (four). If you are a leader who is not yet confused, consider that you could correctly combine a subset of the above terms to posit the existence of something called a “transformational business model open reverse disruptive innovation!”
A lack of clarity on what “innovation” means is a big problem for leaders tasked with driving more of it in their organizations. This is illustrated by an experience in a recent workshop we led with about 50 executives at a large, diversified financial institution. Their chief executive officer (CEO) had publicly declared innovation as a top strategic priority, and this group of leaders was responsible for executing on it. The purpose of the workshop was to share learnings from other companies on how to enable innovation in large organizations and use that as a jumping off point for the group to formulate its own plan of action. To kick things off, we asked each participant to write down answers to the questions “What does innovation mean at this company?” and “Why is it important?” Then we had people share their answers with the group.
The variation in responses astonished everyone. Some said the company needed to create completely new businesses, such as marketplaces for “alternative currencies” like Bitcoin. Others argued the bank needed to reinvent the end-to-end customer experience in its existing businesses, pointing to the recent development of futuristic retail bank branches with a science fiction feel. More common was the view that innovation was about rolling out successive generations of products in their existing businesses, with greater speed and differentiation. And some believed that innovation was really about incrementally improving internal processes and getting more efficient in what they already did. How could these leaders possibly respond in a useful way to the innovation rallying cry when none of them even agreed on what it was or what role it should play?