Monday, December 22, 2003

Some Thoughts on Innovation

"Business has only two basic functions: marketing and innovation. Marketing and innovation produce results. All the rest are costs."

Peter Drucker

Innovation in marketing is also essential. Therefore business has only one basic function - innovation. Innovation is the basis of all competitive advantage: the means by which organizations anticipate and fill customer needs and the method by which organizations utilize people and technology.

Innovation either endows resources with a new capacity to create wealth or creates a new resource. In an organization, resources are capital, people, knowledge, facilities & equipment, and strategic relationships.

Innovation is the process of implementing new ideas, of turning creative concepts into realities. Innovation can manifest itself as new, different or improved:

  • Products

  • Processes

  • Procedures

Innovation can cause change or it can exploit change; systematic innovation which exploits change is generally the most effective.

Systematic, purposeful innovation will create an effective and efficient organization. Systematic, purposeful innovation begins by identifying the changes occurring in a market. This is followed by understanding the opportunities and threats that will result from these changes, developing a strategy to take advantage of the opportunity and avoiding or minimizing threats, assessing the organization's capability to implement the strategy, and developing an organization which can effectively and efficiently innovate.

If this systematic, purposeful innovation process is followed, the organization will benefit by becoming market driven. It will do what is appropriate for the market and it will anticipate the market. As a result, the organization will become more effective and efficient. Society will benefit because the organizations within it that create wealth, create jobs and meet societal needs will be more sharply focused on the proper targets.

The purpose of business is innovation, which, when properly focused, creates wealth as defined in the broadest sense. The creation of wealth benefits all.

Paul Schumann & Donna Prestwood


Tuesday, December 16, 2003

Innovation Strategy: Creating Competitive Advantage ... for Awhile

An innovation strategy is only good for a finite amount of time. One of the worst mistakes an organization can make is to assume that because an innovation strategy has been successful it will always be successful. In reality, the environment shifts -- customers' needs change, competition gets smarter, technologies improve, and the organization itself evolves -- and over time the strategy becomes obsolete. Time is relative. It depends upon the dynamics of the industry.

An innovation strategy is a complex pattern as represented by the innovation map. There are nine different types of innovation and therefore at least nine different principal foci of strategic intent, and there are even more complex secondary and tertiary patterns. The innovation map is a powerful tool for creating and depicting innovation strategies.

Once an innovation strategy has been selected, there is the establishment of a competitive advantage and an immediate vulnerability. On the competitive battlefield, an innovation strategy is like a decision to attack. Each movement creates the opportunity for a response. Each innovation strategy has included within it the seeds of its own destruction. This implies that strategies should be living concepts that link markets, organizational capabilities, business objectives, and stakeholder desires.

An innovation roadmap is the path an organization takes to move from one pattern of innovation to another. The creation of an innovation roadmap requires the integration of strategy, resources, enablers and culture.

Donna Prestwood & Paul Schumann