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  • Writer's pictureMatthew Warnock-Parkes

What is innovation?

It’s a classic discussion in a lot of organisations, what is innovation? How do you classify it, and why should you embrace it?

First, let’s start with the “official” definition of innovation:

“a new method, idea, product, etc.”

Now, let’s throw that out the window because how does that help you? Anyone can do a new idea or a new product, instead, we think you should consider innovation like this...

“Innovation is an activity that achieves your purpose faster and decreases your chance of disruption.”

Let's break that down. Generally, most organisations will have a sense of “This is the problem we solve and this is our solution to it.”. Commonly this can be contained within a problem and/or vision statement. For example, if you are not happy with families in the world not getting enough nutrition, your vision may be “We want to create a world where all families have access to affordable nutritious meals.”. While your purpose maybe “We believe nutrition is everyone’s basic right, we exist to provide affordable meals that provide a healthy balanced diet.”.

To actually achieve that vision, to solve the problem, you will have top-level strategic goals. Often these goals are written in a SMART way (SMART meaning Specific, Measurable, Attainable, Relevant, and Time-Bound). To achieve these goals some form of strategy or plan is needed that takes your macro and turns it into the micro for your team(s) to deliver. This in some shape or form will outline what you plan to do to get from A, today, to B, the realisation of your vision or at least the first major milestone in it. All well and good so far, nothing revolutionary there.

We think innovation is something that could get you to that vision faster than your current planned activity. It’s something less proven, sometimes riskier. For example, you know that creating and marketing a product costs you £6 per item while you sell the product for £10, so if you grow your customers at X rate you can predict what your gross margin, income, net profit will be, etc. This can be structured in your strategy detailing the marketing/promotion/sales/production/service activity you will be doing to achieve your goals. Relatively simple, in theory. However there are also ways you could get more customers, create more products, potentially for less than £6, but they are not proven, they are experimental in your eyes, not in your plan. Then there is the notion that does your product or service, achieves your purpose and vision better than something else.

An example of this would be Netflix disrupted the video rental market by launching its online streaming service in 2007. Suddenly the problem of people wanting to watch the latest films had a better solution than going to blockbuster to rent it. We all know where blockbusters are currently positioned in the market.

Understanding where innovation fits in A good way to understand where innovation comes in is to imagine your organisation's growth drawn as a line on a piece of paper. Growth being the delivery of your strategic targets based on your planned activity. The line goes from where you are, let's say point A, today, to where you want to be, let's say point B; achieving 100 million customers by 2030. How long this line is will vary based on your planned activity; it represents your growth rate. This is your current course, and when you will achieve your goals by. It’s possible that when you do your actual calculations off your business model and strategy you might find that you are not predicted to meet your vision/goals by when you thought you would, this could be because you don't have enough money, resources, or just that the calculations don't pan out, but we’ll come back to this. Now, imagine a line above this with a faster growth rate, that achieves your vision sooner. This is what you could achieve if you were “lucky”. If you were in the right place at the right time, you brought in more revenue, you had more success with delivery .etc. Maybe an influencer endorses your new nutritious meals and 20% of their follower base starts buying your product. This is what you would ideally like to see but the plan does not add up to it; it’s your ideal, your hope. In reality, to achieve it you are often counting on a large amount of luck, because you don’t have the right agreements in place with the necessary contacts or you lack the fundamentals to deliver on it. So, let’s imagine a line lower and longer, where your vision is delayed or never delivered. This is a worst-case scenario and one you want to avoid at all costs. This is what could happen if you experience market disruption. Changing consumer behavior and Covid-19 could be considered market disruptions as would a brand new product launch that disrupts your market. Think Spotify disrupting the music industry or Netflix leading to the end of video rental. In the example above Blockbuster did not consider this when a subscription service was presented to them, they did not factor the cost of disruption to their business. This is also where other competitors are innovating faster than you and inspiring customers to buy their products because they solve their problems better.

The question becomes how do you deliver your vision sooner, and then set your goals on even bigger ideals all while avoiding market disruption?

We would consider anything that falls into this category to be innovation. Innovation is how you can experiment with unproven products, activities, marketing, and ideas that could move the dial on your growth rate. You still need your core activity, this is proven and calculatable given the predictive market conditions but you recognise that it’s not always going to be this way and you need to explore other ways of thinking to accelerate your organisation. Why is this innovation? Innovation is all about perspective; is it only innovation if no one has done it before….ever? Most ideas take inspiration and steal from others. Many believe it was Picasso who said “Good artists borrow, great artists steal”.

So ,you can steal another idea, (assuming no patent rights!), and utilise it for your own benefit. Or create something completely new. If it provides a boost to your organisation this could be considered innovation. The key here is it’s not something you have been doing before and have proven it works for you, but it is something that could help you achieve your vision/purpose sooner. Why does knowing what innovation is matter? Knowing what innovation is helping foster a different environment for nurturing it. It also allows you to build a better model for measuring its impact and understand things that are more likely to be successful in the future. This allows you to create innovation initiatives or actually use the power of the word innovation to inspire and empower. You might set up a specific innovation team or have it as a strand/initiative in your strategy. You could also challenge your staff by allowing them to present or explore ideas.

This also helps you build a framework to understand the investment in time/resource/cost to innovation. Should you spend time explore 2 innovative projects or 10? How much time should staff spend on innovation as opposed to their core workload?

So, how do you have your cake and eat it? The key here is to understand 100% of your activity should not provide 100% directly positive return on the investment be it financial or time-based. The limits of innovation? Innovation does not guarantee success. Sticking the word innovation on a project or initiative does not equal higher impact instead you need an approach to understand how innovation empowers the seeds to create change and drive more growth and higher impact to achieving your vision.

You also need to understand innovation is a net sum game, for every one hugely successful idea you may have nine that never excel as you’d hope. The point is that overall the value you receive in one success and nine failures is far greater than if you didn’t ever take the risk on the 10 ideas in the first place. It also means you took the time to understand would that particular idea help you and what would happen if someone else explored it first. Where to start with Innovation? We are going to cover this in another blog post, so stay tuned for that but for now, we would consider the following key elements to ensuring an overall net success with innovation.

  • A strong understanding of why you exist and what are your opportunities/limits to achieving that

  • The trust and belief to allow your staff to go and try things

  • The right “Business Intelligence” to understand and measure the impact. To make a business case to scale the idea, you’ll have to prove the idea can work in the right market.

  • A framework to go from idea to launch in a scalable way. For example, once you have an idea can you just get on and do it, do you need to create a pitch or business case to be approved. You then need to consider a discovery phase to explore the assumption it will have its desired impact. After that, you might consider a prototype or trial before expanding into larger releases and markets.

  • The buy-in and support of the right people in your organisation

  • Understanding /scaling resources; essentially time and talent. Whether you create an innovation team made up of current staff or new staff will depend on your organisation setup and culture, their abilities and how they are supported will be key. Will they have funds for researching or working with outside support, for example.

  • Lastly, and just as important as everything above is the ability to tell the story of the innovation. This is critical to winning hearts and minds and getting people onboard

What’s next Come talk to us if you want to explore innovation!

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