Tuesday, January 20, 2004

Regarding Apples and Oranges on the Topic of Innovation

">'Is there such thing as 'heedless reverence for innovation'?

Chuck Frey at Innovation Tools has provided an excellent review (12/19/03) of Carleen Hawn's article profiling Apple Computer in the December 2003 issue of Fast Company.

Apple's obsession with breakthrough product innovations has led to several product failures and less than stellar market share in their other more successful product lines. Hawn, reviewing Apple, Xerox and Polaroid as examples concludes that not all innovation is beneficial to organizations: "With such examples as Apple in mind a number of skeptics are beginning to ask whether our heedless reverence for innovation is blinding us to its limits, misuse and risk." The article goes on to point out that process and business model innovations have recently produced greater success in the market in some industries.

Innovation has two dimensions -- class and nature. Class is an indicator of the significance of the change -- incremental, distinctive and breakthrough. Nature is an indicator of the where the innovation emanates -- product, process and procedure. The combination of these two dimensions creates a matrix of nine different kinds of innovation. For a given organization, a unique pattern of innovation meets customer needs and provides competitive differentiation. This pattern of innovation also determines the company's profitability and ultimately shareholder value. A business model is a specific pattern of innovation (e.g., class/nature). And, this pattern of innovation is time sensitive. An innovation pattern that is successful today may not be successful tomorrow.

Dell's business model has a small component of product innovation (incremental and distinctive) and a large component of process and procedure innovation (distinctive and breakthrough). On the other hand Apple's business model is largely breakthrough product innovation with little emphasis on process or procedural innovation. Both business models have a role to play in the industry.

If everyone focused on the same kind of business models where would the great new breakthrough products come from? You can no more force Apple to become a Dell (remember they tried!), than force Dell to become an Apple (they did think about it, but backed away). Both are successful innovators in their own way.

Organizations that consistently produce breakthrough innovations provide a useful service to their industry and society. Why must they be criticized and maligned doing what they do?

We are wrongly measuring everything by economic value add, when we don't have any real clue as to what the real value is to a breakthrough product innovation until it has been around a long while. The real issue is how to reward businesses for coming up with the next breakthrough product innovation.

Click here to read Chuck Frey's review

Click here to read Carleen Hawn's article

Paul Schumann & Donna Prestwood


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