Principles of Innovations

1. Product vs Process Innovation

In my opinion, this is the highest level break-out of the painfully broad term “Innovation”. Product innovation is developing a new product (iPhone). Process innovation is improving the processes employed to produce or deliver the product, and to make it more efficient or productive (eg. Robot welders on the factory floor at GM). Process innovation often falls under names like (Six Sigma or Operational Excellence). Generally product innovation is concerned with increasing revenue and process innovation with reducing costs. It’s very difficult to do both at the same time, for a given product, and the emergence of a “dominant design” is what triggers the shift of effort from product to process innovation.

2. Scale of Innovation

While it may seem obvious, innovation happens at different scales. Broad-based adoption of Personal Computers in the 80s represented a “big” innovation and by contrast the mute button on your remote control is small. Scale is determined by: size of investment, time to ROI, change in user behavior, risk of success, risk of adoption, etc. and is a relative measure. While many terms are used, I prefer: Incremental, Sustaining & Disruptive (for small, medium and large). The non-obvious part is that it is important to always keep in mind when thinking about innovation, because the rules are totally different if you are working on a incremental process improvement vs a disruptive new product.

3. Technology Adoption Curve

Adoption is the risk for any innovation. New tools and practices are not adopted overnight. Like a bottle of perfume opened in the corner that slowly spreads throughout the room, innovations slowly diffuse through society. Understanding this process is critical, as new ideas are embraced first by “early adopters” all the way through to “skeptics”. This is articulated in Marketing High Technology and more recently Crossing the Chasm.

4. The Innovators Dilemma

What if your new low cost model cannibalizes the revenue and profit from the old way of doing it? What if you have an Executive VP of Back Office Operations and your new electronic trading system requires no people to operate it? What if your new roll-out requires 10,000 people to be retrained. Most organizations have a natural immune system to change. In many areas this is a good thing you wouldn’t want to change the location of headquarters every month. But with innovation these anti-bodies can block or kill the very initiatives they could have saved a firm when it’s industry is being transformed.

5. Skunkworks

It is often useful to separate a innovative business unit logically and physically from the rigors (standards, reporting, ROI) of the parent company. The term ‘Skunkworks’ derives from a Lockheed Martin group that was separated from the corporate parent and was very successful in developing many new airplanes. This technique was also employed at Apple by the Mac Group that took up separate offices and flew a pirate flag above their building. If you can’t have a separate building, at least create a “War Room” by permanently taking over a conference room and posting all relevant project information on the walls. It’s important for innovative groups to have their own identity so they can defend themselves from forces that might undo their best efforts.

6. Prototype & Iterate

Some flaws are just not that obvious until you try to use the product. On the first typewriters you couldn’t see what you were typing until the page came out of the machine 15-20 lines later! Visible type was considered an innovation in typewriters! Later someone invented the “Shift” key so that keyboards didn’t need separate keys for capital and lowercase letters! This is also why it is important to eat your own dog food so you feel what the user is feeling.

7. Solutions not Technologies

There is a major difference between a technology and a solution. A technology sounds like this: “a networks of orbitals, that constantly send and receive geospatial data streams with synchronized clocks that triangulate position on spherical surface.” A solution sounds like this: “with this GPS, I will never get lost again, anywhere in the world”. There is much work to be done between a new technology and something that solves a problem, and not all technologies make it there. Ask yourself what specific job are you trying to make easier? What problem am I trying to solve? What is the one thing your user trying to do, and how can you help with it. Clarify those questions as precisely as you can, then focus all your energies on designing a solution for just that one task.

8. Economic Value

Despite your grand vision to change the world, the world will ask you to measure your innovation by much humbler means such as: How are you making something Cheaper/Faster/Better? Can we lay-off people if we buy your product? What are the trade-off costs? The switching costs? The trial costs? Why is it better than doing nothing at all? What is the payback? How long till we break even? Is the risk worth the reward? Understanding the nitty gritty of economic value (aka what people are willing to pay for, and why?) will help you sell your idea to the world.

9. Individuals Required

As you probably guessed by now, true innovation isn’t easy. Social pressures, set backs, bean counters… Along the way you will need to rock the boat a bit and probably even just outright break the rules. We’ve all heard the line “Ask for forgiveness not permission” now you’ll have to live it. I have also heard it said “the defining trait of an entrepreneur is that they don’t need to ask anyone for permission.”

10. Quality

The ancient Greeks had a concept called arête which meant quality or goodness. It’s hard to pin down the exact meaning, but it’s the type of thing ‘you know it when you see it’. Take one look at the iPhone and you can feel the Quality. Go to a typical DMV, and chances are you will see a lack of quality (no offense). Quality is important because people will give your new thing a try simply because they like the experience of touching something of quality, and that drives adoption. Quality, and the passion required to pursue it, in any field, is admirable and that gives you your shot.