Men­tion the word ‘in­no­va­tion’ and most peo­ple think of ex­tra­or­di­nary in­ven­tions cre­ated by soli­tary ge­niuses. How­ever, the majority of business in­no­va­tions to­day are quite the op­po­site. The com­pa­nies that gen­er­ate them thrive on col­lab­o­ra­tion, a free exch

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on the need for in­no­va­tion to bring dif­fer­en­ti­a­tion and value ad­di­tion.

Even though ev­ery known statis­tic says that nine out of ten in­no­va­tions do not work, there con­tin­ues to be an un­flinch­ing faith in in­no­va­tion, ev­i­dent from a sim­ple search that throws up the pop­u­lar­ity of the word ‘in­no­va­tion’ in the core val­ues, strate­gic pri­or­i­ties and/or, mis­sion and vi­sion state­ments of com­pa­nies. In their quest for the ‘next big thing,’ com­pa­nies of­ten over­look the small stuff that also adds enor­mous value. Line/brand ex­ten­sions or ren­o­va­tions of ex­ist­ing brands or ser­vices are not con­sid­ered in the same league be­cause of the per­cep­tion that they are in­cre­men­tal and not dis­rup­tive.

So, what cre­ates this in­fat­u­a­tion with in­no­va­tion? The ob­vi­ous an­swer is the belief that the mar­ket re­wards com­pa­nies that have a suc­cess­ful in­no­va­tion track record, with higher mul­ti­ples in their val­u­a­tions. The not-so-ob­vi­ous in­sight comes from com­pa­nies with an av­er­age or un­suc­cess­ful track record of in­no­va­tion, in

that such com­pa­nies of­ten tend to over­es­ti­mate their own com­pe­tence and un­der­es­ti­mate the com­plex­ity that in­no­va­tion brings. There are two un­in­tended con­se­quences of this—the first is the hid­den cost of not al­lo­cat­ing ad­e­quate re­sources to strengthen or for­tify ex­ist­ing propo­si­tions that could work harder and gen­er­ate prof­itable growth; and the sec­ond is that the al­ready limited re­sources get al­lo­cated to in­no­va­tion ini­tia­tives that gen­er­ate sub-op­ti­mal value.

The nar­row view of in­no­va­tion is to re­strict it to new prod­ucts or ser­vices. The more com­pre­hen­sive view of in­no­va­tion and one that I would urge read­ers to hold is that in­no­va­tion is any­thing that is ca­pa­ble of bring­ing ‘new value’ to an en­ter­prise or or­ga­ni­za­tion. (This also kills the never-end­ing de­bate in com­pa­nies on what in­no­va­tion is and what ren­o­va­tion is).

This per­spec­tive lib­er­ates us from re­strict­ing in­no­va­tion to new prod­ucts or ser­vices, and ex­tend­ing it to en­com­pass all ac­tiv­i­ties and pro­cesses in the value chain—from the de­sign of the prod­ucts and/or ser­vices to the de­sign of the business model that de­liv­ers th­ese prod­ucts and/or ser­vices, and the op­er­a­tional ex­cel­lence that aligns each process in the im­ple­men­ta­tion of the business model. This is as true of a com­mer­cial en­ter­prise as it is of an aca­demic in­sti­tu­tion, a so­cial en­ter­prise or any other def­i­ni­tion we use to de­scribe a set of ac­tiv­i­ties that ul­ti­mately de­liver a ben­e­fit to both the ar­chi­tect of the ac­tiv­ity and the con­sumer of the ac­tiv­ity.

Viewed from a sys­temic lens, in­no­va­tion is a con­cept that re­quires both ca­pac­ity and ca­pa­bil­ity to be mon­e­tized in or­der to cre­ate new value. It dis­lo­cates the tra­di­tional way of think­ing and do­ing, and there­fore de­mands new ca­pac­ity and ca­pa­bil­ity from or­ga­ni­za­tions—the ca­pac­ity to take risk and chal­lenge the sta­tus quo, and the ca­pa­bil­ity to cre­ate an ecosys­tem where peo­ple, process, struc­ture, met­rics, and the en­vi­ron­ment and cul­ture align in a man­ner that cre­ates some­thing unique and mean­ing­ful. In­no­va­tion is there­fore the cul­mi­na­tion of a set of ca­pa­bil­i­ties that can pro­duce in a re­cur­ring and sus­tain­able man­ner, prod­ucts and ser­vices that cre­ate a com­mer­cial and so­cial ben­e­fit.

Or­ga­ni­za­tions need to con­tin­u­ally in­no­vate be­cause the nat­u­ral ten­dency of all sys­tems is to at­ro­phy over time, and in­no­va­tion is the only way to keep th­ese sys­tems rel­e­vant and dif­fer­en­ti­ated. More­over, with time, con­sumer needs change, mar­kets evolve, and ma­ture and com­peti­tors cre­ate ‘same­ness.’ In this con­text, in­no­va­tion is not an end in it­self, but a way to re­vi­tal­ize business by mak­ing the old, new again, thereby at­tract­ing new users, cre­at­ing new uses, and bench­mark­ing com­pe­ti­tion.

To gen­er­ate new value, the new ac­tiv­ity must be both rel­e­vant and dif­fer­en­ti­ated. A re­cent case in point is the Tata Nano, which was an ex­tremely in­no­va­tive prod­uct, ex­cept that the user group to which it was tar­geted did not con­sider it rel­e­vant or mean­ing­ful to their needs. It met all the dis­rup­tive cri­te­ria for in­no­va­tion—novel, unimag­in­ably af­ford­able, ac­ces­si­ble, etc., but it did not meet the cri­te­ria of con­sumer rel­e­vance and dif­fer­en­ti­a­tion.

Great brands across cat­e­gories en­sure that they re­main rel­e­vant and con­tem­po­rary, and of­fer some­thing dis­tinc­tive that con­sumers re­ally care about. If a brand is rel­e­vant, but not dif­fer­en­ti­ated, it gets eas­ily lost in the sea of same­ness; and un­less the business model it­self is one of cost lead­er­ship, the brand is un­likely to be a suc­cess.

In­no­va­tion re­quires in­spi­ra­tion, in­sight, and the pur­suit of ex­cel­lence. It en­ables or­ga­ni­za­tions to dif­fer­en­ti­ate them­selves, which is why some of the path-break­ing in­no­va­tions come, not from the in­cum­bents or mar­ket lead­ers, but from the new­com­ers, the in­sur­gents, who in the pur­suit of find­ing new op­por­tu­ni­ties find new, un­der­served seg­ments or mar­kets. The leg­endary launch and suc­cess of sin­gle-serve sa­chets of sham­poo is cred­ited to a rel­a­tive new­comer in the mar­ket, Cav­inKare, and not the mar­ket lead­ers of the time. This at­tempt from a late en­trant to dif­fer­en­ti­ate its of­fer­ing spawned

sin­gle-serve packs across sev­eral cat­e­gories. How­ever, from a business per­spec­tive, this suc­cess was as much the dis­cov­ery of an af­ford­able sin­gle-serve pack as it was the cre­ation of a new business model and sys­tem ca­pa­bil­ity to man­u­fac­ture and sell th­ese at a profit and sus­tain the mo­men­tum.

Sus­tain­abil­ity in any en­ter­prise de­mands a new way of think­ing and do­ing be­cause the con­text in which busi­nesses op­er­ate con­tin­ues to change. The com­pet­i­tive­ness of mar­kets de­mands dif­fer­en­ti­a­tion from or­ga­ni­za­tions to stay rel­e­vant. In re­cent times, there is no bet­ter ex­am­ple of this than the in­no­va­tions un­leashed by Ap­ple, only to be chal­lenged by Sam­sung, which in turn has been chal­lenged by other smaller brands in an at­tempt to of­fer ‘same­ness’ at a lower price to con­sumers. Dif­fer­en­ti­a­tion is there­fore a mov­ing tar­get and in­no­va­tion/ ren­o­va­tion is a key in­gre­di­ent of its suc­cess.

The prob­lem that most com­pa­nies run into whilst chas­ing in­no­va­tion is that they for­get to ren­o­vate, which is sim­ply con­tin­ual in­no­va­tion in an ex­ist­ing prod­uct or process. Ren­o­va­tion is seen to be less glam­orous than in­no­va­tion. But, ren­o­va­tion is also ca­pa­ble of adding new value at a cost that is sig­nif­i­cantly lower than in­no­va­tion be­cause ren­o­va­tion largely uses core com­pe­ten­cies of an or­ga­ni­za­tion and ex­tends them to new ar­eas whereas in­no­va­tion re­quires new com­pe­ten­cies.

It can be ar­gued that of­ten­times business model in­no­va­tion is ca­pa­ble of gen­er­at­ing far greater rev­enue and profit than prod­uct in­no­va­tion. From a sys­temic per­spec­tive, in­no­va­tions that con­verge a new prod­uct idea with a new process to gen­er­ate new value are the most suc­cess­ful—the Dell model of or­der tak­ing and de­liv­ery when the brand was launched in an al­ready crowded per­sonal com­puter mar­ket is a great ex­am­ple of this.

A crit­i­cal fac­tor that com­pa­nies over­look while driv­ing in­no­va­tion is a deep un­der­stand­ing of con­sumers and how prod­uct func­tion­al­ity fits into their us­age be­hav­ior. But lim­it­ing in­no­va­tion to con­sumer feed­back in turn lim­its in­no­va­tion be­cause con­sumers do not know what they do not know. Here comes the role of con­ver­gence of sci­ence and tech­nol­ogy, of con­sumer in­sight and routes to mar­ket, and of the de­sign of a business model that is ca­pa­ble of gen­er­at­ing value on a con­tin­ual ba­sis. All this put to­gether is ‘in­no­va­tion.’


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