Back to Entrepreneur School – What is Innovation?

I think it’s time to go back school for entrepreneurs and evaluate what it is that we mean when we say “innovation.”

Post Image 1.jpgThe experts say with resounding consistency “… entrepreneurs MUST innovate in order to remain competitive…” Have you heard this before? If you are like me, you have heard this at least 1,000 times from at least 1,000 different so-called “experts.” I doubt, however, that most of these experts could explain what this means in a concrete actionable way. I have often asked myself, what is it that entrepreneurs need to know about how to adopt a spirit of innovation in their own businesses?

I have concluded that we need to send entrepreneurs back to innovation school, to define what we mean when we say “innovation” and to provide some direction on how business owners can change their business strategies to promote true innovation.

Let’s start at the beginning with the fundamental question – “what is innovation?”

There are MANY different types of innovation. Consult your reference tool of choice, and I guarantee you that it will provide you with multiple flavors of innovation definitions. In his book “Dealing With Darwin” marketing guru Geoffrey Moore identifies over a DOZEN forms, including: Line Extension Innovation, Enhancement Innovation, Acquisition Innovation and Organic Innovation.

Post Image 2.jpgNow – let me say first IN THE INTEREST OF FULL DISCLOSURE that Moore is a genius and that “Dealing With Darwin” is a must read for any entrepreneur (as were his other books Crossing the Chasm and Inside the Tornado). Okay, with that behind us, because I am simple and I like to keep things simple, I believe that all entrepreneurs should be aware of and employ three types of innovation:

Incremental Innovation: Incremental innovation seeks to improve the systems that already exist, making them better, faster and cheaper. This is sometimes called “Market Pull” Innovation. The knowledge required to offer a product builds on existing knowledge – competence enhancing. Most innovation is incremental. Innovation still allows existing products to stay competitive. This is the form of innovation with which we are all most familiar. Here's an example – the Apple iPhone 4 contained incremental innovations over the iPhone 3. Slight improvements such as a front-facing camera and longer battery life were incremental improvements over the previously existing technology.

Disruptive Innovation: innovations that improve a product or service in ways that the market does not expect, typically first by designing for a different set of consumers in the new market and later by lowering prices in the existing market. An example of disruptive technology innovation is digital media like mp3 music and digital video files. Prior to the introduction of this new technology, CD and DVD sales fueled the expansion of brick and mortar outlets like Blockbuster, Hollywood Video, Tower Records, and a long list of other outlets. Digital Media was so truly disruptive that it displaced existing markets and created a new technology paradigm.

Heretical Innovation: This term was coined by my associate Andrew Winston, a globally recognized expert in green business. Winston posits that “the kind of innovation that changes markets and turns others into dinosaurs can happen even in down times. But it may require going beyond even 'disruptive' innovation to something even harder. The true leaders will challenge core assumptions of their businesses and industries.” (Heretical” Innovation and the Path to a Green Recovery)

Heretical Innovation involves asking the really difficult questions, challenging the status quo, questioning business models and coming up with new models that may seem counterintuitive.

An example is XEROX. This company built its image on being The Document Company, encouraging its customers to spend money on copiers, printers, paper, and ink. Indeed, for most of the history of XEROX, the company’s success was reliant on their customers need to print more. Now, Xerox is helping companies to use fewer printers, less paper and less ink. “This is seemingly heretical but it is the way companies need to innovate; they need to innovate their service model, innovate the kind of products they sell,” says Winston.

Another example is Waste Management, a company with a business model that previously relied on hauling ever increasing amounts of customer generated wastes into landfills. The company has evolved its business model – beyond disruptive innovation – to the point where they are working to help customers generate less waste. That is true heresy! Winston notes, “Now instead of paying to dump garbage, customers may get paid for valuable material, while the other stream of waste will create a potentially significant source of clean energy. In its WTE plants, Waste Management now produces enough energy to power one million homes, which is more than all the solar power in the U.S.!”

Entrepreneurs MUST adopt a drive towards heretical innovation in their business strategy. They must be unafraid to ask the really difficult questions, think FAR outside the box and adopt strategies that may at first seem counterintuitive.

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