Wednesday, September 8, 2010

What is Innovation?


by Dr. Phil Samuel

The word “innovation” is one of the most frequently used words within the business vernacular. We encounter this word within annual reports, company brochures, town hall meetings, and news feeds. Most organizations believe that their ability to innovate is the “secret sauce” to securing the future of their business. Yet, many organizations struggle to provide a consistent definition or a shared meaning for the word, “innovation”. It is very important for every organization or group to agree on a common definition of “innovation” and how its frameworks are applied, if it provides the operating system for building the future.


Working with organizations around the world, we have noticed a convergence among businesses to rally around three themes when defining the word “innovation” within the business context. The three themes are about bringing a new idea to life, generating new value for customers and generating new value for the business (provider).

The first theme - bringing new ideas to life – is the essence of creativity. It turns out all human beings are endowed with the gift of problem solving and creativity. Our creativity differs in terms of level (how much) and style (in what way). We resolve problems by bringing novelty to solutions in a paradigm consistent and paradigm busting way. They are both necessary and important for our survival and making progress.

The second theme is about creating value for customer. To explain the concept of customer value, we must explore why customers are interested in our innovation. It turns out that customer is interested in our new solution only if it solves a problem. This higher purpose for which customer buy or use our solution is called a Job To Be Done (JTBD). In the words of Harvard Business School professor Clay Christensen, customers hire our solution to get a job done. Understanding the JTBD, which is solution neutral, is the first step towards innovation. For every JTBD, customer uses a set of solution neutral criteria to choose from among the competing solutions. These are called “outcome expectations” or “hiring criteria”. The positive hiring criteria are called “desired outcome expectations” and the negative hiring criteria are called “undesired outcome expectations”. The desired outcome expectations are the measurements of the benefits customers want to achieve while getting a job done while the undesired outcome expectations are the measurements of the costs and harm customers want to avoid while getting a job done. When customers want to ‘clean clothes at home’ (a common JTBD), they would like to know if the solution will be effective in removing stain, dirt, and bacteria. They would like clothes to appear and smell fresh and appealing. Also they would like their clothes to look pressed and free of wrinkles. While achieving many of these characteristics, customers would like to minimize the hazard, cost, time, and amount of resources needed (such as electricity, detergent, human intervention, and other devices) to get the job done. The former list provides examples of desired outcome expectations while the latter provides the list of undesired outcome expectations. Value can be defined as the ratio of desired outcome expectations (benefits) to undesired outcome expectations (cost and harm). The objective of every innovation is to bring about a new solution to life that generates more value to customer.

The third theme is about creating value for the business (provider). To increase the value for the business, one must understand the jobs provider is trying to do. For most for-profit businesses, the highest level JTBD is ‘create wealth for the stakeholders’. For this JTBD and every other lower level JBTD, companies must clarify the associated “desired outcome expectations” and “undesired outcome expectations”, so that business value can be clearly understood.

How might we apply these three themes to some historical examples of inventions such as the Light Bulb, Typewriter, Motorola’s Iridium satellite phones, Ford Nucleon and Internet? Did they contain new ideas, did they come to life, did they generate new value to customers and did they bring about new value to the provider?

Dr. Phil Samuel is the Chief Innovation Officer (CIO) for BMGI, a management-consulting firm specializing in performance excellence and innovation. An integral part of BMGI’s management team since 2005, Phil brings more than a decade of experience to his role as CIO, helping clients’ in-source creativity and increase organic growth potential. Phil is a dynamic speaker and published author, whose most recent credits include the books, “Design for Lean Six Sigma: A Holistic Approach to Design and Innovation” and “The Innovator’s Toolkit: 50+ Techniques for Predictable and Sustainable Organic Growth.”

1 comment:

greg.heist said...

I think the Iridium phone is an excellent example of the ways in which the theme of "creativity" (and Iridium WAS a ground-breaking and creative technological feat) seemed to completely overshadow the creation of value for the consumer and, importantly, for the enterprise creating it.

A little Googling yielded this sad excerpt from their annual report: "Iridium has borrowed approximately $3.02 billion as of March 1, 1999, and expects to borrow a substantial amount of additional funds. Iridium is not currently generating any meaningful revenues to fund its operations or repay its indebtedness."

Clearly, while Iridium provided a JTBD for customers (voice call access where cell phone coverage didn't/couldn't exist, the size and weight of the handsets made them a brick that was inconvenient to lug around.

It's an excellent case study in why all three of the themes you point out in your post are so critical to the success of any innovation initiative.

Regards,
Greg Heist
VP, Research Innovation & Technology
Gongos Research
http://go-innovate.typepad.com

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